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Web Exclusive | July 2014

Cotton prices ease, but import to double

First, the cotton price in India firmed up slowly in the last six months, and since the international prices were lower, there has been higher import largely coming from African countries into India. It is still continuing, and the cotton import is expected to touch 1.5 million bales in the current cotton year (Oct 2013 to Sept 2014) against 0.7 million bales in the previous year. Now, slowly and steadily, the cotton price is easing.

Meanwhile the cotton estimate is put at 30 million bales (1 bale = 170 kg) for the next crop year against last years production of 36.5 million bales.  Indias cotton output is likely to hit this low in the ensuing crop year 2014-15 due to a steep decline in sowing area on delayed and uneven distribution of monsoon rains because of the El Niño phenomenon. The decline assumes significance in the wake of sustained pressure on cotton prices for the past three years.

Pressures on cotton price globally are affecting its future price on the cotton market. In the Texas and Georgia, the two largest cotton producing states in the US, the crop is getting delayed with the farmers  bracing for a bumper yield.

The easing of cotton price is likely to continue, due to lower demand from China and also due to cotton demand from the domestic market declining in recent months, due to a slump in consumption from yarn producers. Prices are likely to remain subdued.

Despite the slowing in exports in recent weeks, Texprocil, the apex export promotion body, reported yarn exports at 293.6 million kg in the first quarter of the current financial year (2014-15), compared to 279.3 million kg in the same period last year. Texprocil has urged Cotton Corporation of India to buy from the market when prices here are cheaper than abroad and offload when these breach international prices. It would, they say, benefit farmers and mills.

India imports extra-long staple cotton, which is not available domestically. Mill consumption of cotton has more or less remained stagnant at 25 million bales, while small-scale units’ consumption has increased marginally this year to 2.5 million bales from 2.3 million bales last year. Total demand for cotton this cotton year is pegged at 40.1 million bales compared to 38.4 million bales last year.

The average cotton yield in 2013-14 has increased by nine per cent to 565.36 kg per hectare (ha) compared to 2012-13 as the quality of the seeds has improved despite the area under cotton falling to 11.73 million ha compared to 11.98 million ha in 2012-13.

Exports of cotton increased to 11.4 million bales compared to 10.1 million bales last year, according to CAB estimates. Imports of cotton also decreased to 800,000 bales compared to 1.4 million bales last year. China imports more than 65 per cent of Indias cotton. This year so far it has imported 6.2 million bales. The other major importers of Indian cotton are Bangladesh, Turkey, Vietnam and Pakistan.
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