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Spotlight | December 2015

Dark clouds still hang over cotton!

Dark clouds that have gathered over cotton, the once-white-gold, are yet to disperse. Rising stock, falling price, China’s detrimental policies, agricultural crisis and boom in synthetics are sending shock waves across nations, more so in India. An ITJ Special Report.

China has bought less cotton and yarn. Price of cotton has been slowly declining in the Indian market. Clouds of uncertainty are hanging over the industry and the spinning mills, once the backbone of the Indian textile industry is showing signs of crumbling under the blow of reduced offtake . To add to the woes, the new cotton season has already begun from October 1. India is likely to carry one of the highest closing stock in the history, said industry body Cotton Association of India (CAI), while releasing its second estimate of cotton production for 2015-16 season.

The cotton year is from October to September as arrival of new cotton normally begins from October. CAI lowered its estimate for the cotton season 2015-16 and placed the same at 377 lakh bales of 170 kg each, down by 1.5 per cent over the cotton production in the previous year. The CAI has also released its August estimate for the ongoing cotton season 2014-15 and retained the crop at 382.75 lakh bales of 170 kg each.

The projected balance sheet drawn by CAI estimated total cotton supply for the season 2015-16 at 467.65 lakh bales while the domestic consumption is estimated at 325 lakh bales thus leaving an available surplus of 142.65 lakh bales. The country is set to witness one of the highest closing stocks in the history, as at the close of the cotton season 2014-15.

With prices ruling much below the government mandated minimum support price (MSP), farmers and the industry is waiting for the government to announce market intervention to support cotton prices.

According to a report of the Ratings Division of Credit Analysis & Research Limited [CARE] a few months back itself, the demand for cotton in international market is sliding, which can be largely linked to China’s new cotton policy, as China constitutes about 60 per cent of the India’s cotton exports. Cotton export from India is estimated to fall from high of 11 million bales in 2013-14 to 6-7 million bales in 2014-15.

World area is projected to decrease 7 per cent to 31.2 million hectares, and assuming a world average yield of 765 kg/ha, production is forecast down 9 per cent at 23.9 mn t from 2014-15. After reaching a record area of 12.3 million hectares in 2014-15, area in India is forecast down 5 per cent to 11.6 million hectares, and production down 3 per cent to 6.4 mn t in 2015-16, according to International Cotton Advisory Commitee (ICAC). World area is projected to decrease 7 per cent to 31.2 million hectares, and assuming a world average yield of 765 kg/ha, production is forecast down 9 per cent at 23.9 mn t from 2014-15. The Chinese Government announced a cotton subsidy price of 19,100 Yuan per tonne for 2015, down from 19,800 Yuan per tonne in 2014. Accordingly, area in China is expected to contract 12 per cent to 3.8 million hectares, and production could decrease by 16 per cent to 5.4 mn t, ICAC said.

In the US, prices for some competing crops are likely to discourage farmers from planting cotton, and area is expected to fall 17 per cent to 3.3 million hectares. Assuming an average yield of 912 kg/ha, production in the US could reach 3 mn t in 2015-16. Pakistan’s production is on track to reach over 2.3 mn t in 2014-15, around 1,00,000 t under peak production of 2.4 mn t achieved in 2004-05. Pakistan’s average yield is expected to set a new record in 2014-15, and is projected up 14 per cent to 810 kg/ha. However, in response to low prices, cotton area in Pakistan is forecast down 6 per cent to 2.7 mn t, and production down 11 per cent to 2 mn t in 2015-16.

In the last two se

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