Posts Tagged ‘cotton prices’

COTTON…. “The soft, fluffy plant doing a great job”

China becoming export-oriented &‘hungering’ for most commodities for their industries at an alarming rate has been the main driver for high and increasing cotton prices.

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Cotton season 2009-10

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To start with the some statistics of current season 2009-10, the Cotton Advisory Board, in its recent meeting held on 8th April 2010 has placed the cotton acreage in the country during 2009-10 to 101.71 lakh hectares as against the acreage of 94.06 lakh hectares during the previous year. However, due to the vagaries of monsoon (irrigation coverage is 63%) & severe pest attack, cotton production in the country during this season has been revised downward from the earlier estimate of attack, cotton production in the country during this season has been revised downward from the earlier estimate of 295.00 lakh bales to 292.00 lakh bales as against cotton production of 290.00 lakh bales in the previous year.

Quantity in lakh bales of 170 kgs each Source: Cotton Advisory Board vide its meeting dt.08-04-2010

Arrivals scenario

As per the latest release by Cotton Corporation of India (CCI), cotton arrivals in India’s local markets were up by 3.3% to 27.90 million bales during the October- April period.

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Cotton Season 2010-11

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Assuming normal 2010 monsoon, India’s cotton production may increase by over 6% to a record 25 million bales in 2010-11 season, acc to the US Department of Agriculture. Productivity is also expected to rise by 6 per cent at 528 kg per hectare in the next season.

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Cotton mill use in 2009-10 rebounded faster and stronger than expected after a sharp drop in 2008-09 caused by the global financial and economic crisis.

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•Cotton ending stocks, a measure of available supply, for the current 2009- 10 year will drop by 43.35% to 40.5 million bales.

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Government Intervention

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In order to check the rise in prices of raw cotton in the domestic market, the government of India has imposed a duty on the export of the commodity. Apart from this, the Centre has also decided to levy a 3 per cent duty on cotton waste exports. An export duty of Rs 2,500 a ton is imposed export duty of Rs 2,500 a ton is imposed from April 9, 2010.

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The Deep Impact….

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•Ban on cotton exports has forced Pakistani buyers to look for alternative supplies.

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•Pushed cotton prices in New York to a two-year high on concern reduced exports from the nation may worsen tight global supplies.

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Global Scenario

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•World cotton production is forecast up by 13% in 2010/11 to 24.8 million tonnes, driven by high cotton prices.

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•World cotton mill use is expected to continue to recover in 2010/11, growing by 2% to 24.8 million tonnes, pushed by continued improvement in global economic growth but limited by high cotton prices.

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•World cotton trade is expected to increase to 7.7 million tons. Global cotton ending stocks are expected to remain stable in 2010/11. Global cotton stocks are expected to drop by 18% to 10.4 million tons by the end of July 2010, the smallest level in six years.

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•U.S. cotton plantings are accelerating, reinforcing expectations for a bumper crop following a wet winter in the big producing states. The U.S. cotton crop was 26% planted in the week to May 2, up from 16% the week before and slightly higher than the five-year average of 25% for this time of year, according to the latest data from the U.S. Department of Agriculture.

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Optimistic Outlook for Cotlook

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The continuous increase in Cotlook index was driven mainly by a rising gap between declining production and recovering consumption. The Cot look A Index jumped to over 90 cents per pound in the last part of April, after the Indian government announced the suspension of cotton export registrations and requested that cotton exports already registered, but not yet shipped, be revalidated, with a monthly  cap on revalidations to be determined.

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Conclusion

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To sum up, cotton futures last week declined in New York, but physical prices remained at a very high level on the international market irrespective of stronger U.S. dollar index. In absence of Indian exports, an expected short-supply is increasingly looming, especially for higher grades. Cotton prices will sustain its rally on back of shrinking stocks and non- availability of fine lint besides arrival of new cotton lots not before July 2010.

India’s Garment Exports Dropped 17%

India”s apparel exports fell 17 % in October, 2009 to $603 million as compared to October, 2008. Due to the uncompetitive pricing of fabrics in the domestic market the country lost its market share to countries like China, Vietnam and Bangladesh.

The rising cotton prices remain a concern for the exporters as it had raised the cost of yarn, thus making the domestic garments costlier. Due to the increase in price, the overseas buyers are placing orders with China, Vietnam, Indonesia and Cambodia, which are selling garments at lower rates as compared to India.

Mr. Rakesh Vaid, Apparel Exports Promotion Council (AEPC) Chairman, said, in spite of the demand from the US and EU are reviving, the Indian is losing its share to units in neighbouring nations as they have large-scale production.

Mr. Vaid said, the duty drawback rates, which tends to control the Customs duty, central excise duty and service tax on items for export, given to Chinese apparel exporters, have been revised five times in the last some months from 11 % to 17 % on value of Freight on Board (FOB), while the Indian exporters get only 8.8 % rebate.

During Jan-Sept, 2009, the exports” share of Indian apparel declined by 6.46 % to $2.27 bn At US, as compared to $3.07 bn in the same period last year. AEPC said, during Jan-Sept, 2009, China”s exports rose by 1.95 % to $17.23 bn, Bangladesh by 2.35 % to $2.66 bn.

According to industry experts, many garment exporters has stopped its production or cancel the orders due to the rise in prices of premium quality cotton, which was trading at Rs 20/metre in July 09, has risen to 55 % at Rs 31 /meter.

AEPC said “Unless we get cotton yarn at competitive rates, we will not be able to compete with China, Bangladesh, Sri Lanka and Vietnam.”

To promote outward shipments of value-added items, the exporters in November, had asked the government to either ban cotton exports or put a sealing of 400,000 bales/month on exports of natural fibre.

Last week, the government said, it had no plans to ban the export of cotton, as surplus stocks needed to be offloaded overseas. Textiles Minister, Mr. Dayanidhi Maran had said during this season the total availability of cotton stock is 33 million bales which is 4-5 mn bales more than the expected production of 29 mn bales. During 2008-09, peak export of cotton was 8.5 mn bales.