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USDA predicts Indian Cotton output at 37.5 mn Bales;CCI procurement, Export revival to take prices northward

2 Jan 2020 2:50 pm
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Mumbai (Commodities Control)- For the Marketing Year 2019-20, the U.S. Department of Agriculture estimates India’s Cotton production to be at 37.5 million bales (1 bale=170 Kgs), 200000 U.S. bales lower than the previous estimate.

The Cotton Advisory Board (CAB) has revised the MY 2019/20 production estimates to 36 million bales (1 bale=170 kgs). CAB estimates the yields at 486 kilograms per hectare, 1% lower than USDA’s yield estimate of 491 kilograms per hectare.

So far, prices of Indian cotton have been trading below MSP. According to USDA, limited Government procurement, weak export demand and poor domestic mill purchases are the prime reasons for the downtrend. Even the pace of cotton arrivals has picked up in the last few weeks.

Having said so, USDA sees a short-term increase in raw cotton prices. Apart from the latest estimate of dip in production and yield, rise in consumption figure is also a plus for cotton prices.

According to USDA, for MY 2019/20 cotton consumption is expected to touch 31.5 million bales (1 bale=170-kilogram), 100,000 U.S. bales higher than last USDA estimate.

Indian cotton ex-gin prices are 3-4 cents lower than Cotlook-A Index which, USDA believes, should make Indian cotton competitive in the international market

The latest report substantiates the fact that Government procurement is strengthening. As of December 14, CCI has procured 1.6 million bales (1bale = 170 kg) in MY 2019/20 under the MSP operations, with the procurement pace increasing during December. However, CCI continues to hold almost 900,000 bales (1 bale = 170Kgs) of unsold stock from MY 2018/19.

There is revival sign pointed in USDA’s trade report, as well. As per the latest estimates, Cotton Yarn export shipments in October were higher by 19%, at 79,000 MT, than previous month as demand for yarn remains firm and should reflect in terms of higher shipments in the coming months.

The export shipments of cotton fabric during the first three months (Aug-Oct) of MY 2019/20 are 4% higher than same time last year, and 5% higher in October than previous month.

During December 2019, the wholesale seed cotton market prices stemmed its fall, with the average price touching Rs 5062/100Kgs, up 1.6% from the previous month, in major cotton growing states.

There are reports of pink bollworm in Gujarat, Telangana and Maharashtra in the standing crop. In Gujarat, official reports of sucking pest and PBW are from South Saurashtra. The impact would be visible in the arrivals mostly during the third picking which would arrive in the market yards in one months’ time. Similarly, in Maharashtra and Telangana, prevailing weather conditions are congenial for incidence of pink bollworm in cotton as per official reports.

India: Estimate of 2019/20 Cotton Exports ( bales)

August 75,381

September 70,695

October 109,639

Total (Aug-Oct) 255,714

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