MUMBAI (Commoditiescontrol) - Cotton prices have started moving up despite a correction in the global prices. In last one month the Indian prices have gained by 4-6 percent, but the global prices have declined by around 4 percent. The Indian rupee to some extent cushioned the impact on Indian competitiveness by depreciating by around one per cent for the same period.
The arrivals have declined to be around 30,000-40,000 bales (170kg each) per day. Indian prices are in the no-man’s land. Domestic arrivals are down and so is domestic consumption. Weekly exports have now reduced to 50,000-60,000 bales per week, while the imports have increased to being 30,000-40,000 bales per week. With export and import parities being absent and demand and supply at the subdued levels of the season, the prices have started reflecting the near term scenario.
The Cotton Corporation of India (CCI) reports that the arrivals till date are around 298 lakh bales. This is 14.4 percent down year-on-year according to the CCI numbers that were reported to be 348 lakh bales as on May 18, 2015. Assuming that the pace of arrivals has already been factored in, if the last year’s crop was 380 lakh bales (CAB) 14.4 percent lower crop size would work out to be close to 325 lakh bales.
Ministry of textile has updated its March 2016 consumption numbers. October to March consumption at around 149 lakh bales is down by 2 percent compared to last year same time of around 152 lakh bales. At 25.40 lakh bales of consumption in the month of March it is 3.3 percent higher month on month but 3 percent lower year-on-year. Even a marginal gain in the total consumption also looks very difficult because if trend is any indication, month of March usually witnesses peak or near peak consumption in a calendar year (Jan-Dec).
Hence with close to 76 lakh bales of opening stock, 325 lakh bales of production, 14 lakh bales of imports, no growth in consumption at 310 lakh bales (as estimated by CAB), and exports of around 70 lakh bales, the carry forward will be anything between 35-40 lakh bales. This is less than two months’ consumption requirement.
The latest reports pouring in from weather and sowing fronts are also not very encouraging. India Meteorological Department (IMD) has forecast that the monsoon would be delayed by a week or so, even as other weather foresting agency Skymet has maintained the monsoon to be on time.
Press Trust of India (PTI) report suggest that the cotton acreage in Punjab and Haryana has remained far less than the targeted area despite a campaign to push farmers for timely sowing of the crop to prevent pest attacks. Punjab has so far seen cotton sowing at 2.08 lakh hectares, less than half of the target of 5 lakh hectares. Haryana is a little better off with 65 per cent sowing so far against the target of 6.20 lakh hectares. Officials attributed non-achievement of sowing target to farmers preferring other crops like paddy, pulses over cotton and non-availability of canal water. The governments in both the states encouraged farmers this year to grow indigenous cotton as domestic variety has resistance to whitefly attack.
Sowing has still not started in irrigated area of Khandesh(Maharashtra) followed by Nimad region (Madhya Pradesh) due to lower underground water amid back-to-back poor monsoon in the country. Further many central and North Indian states are suffering from severe heat wave.
Punjab-Haryana crop is first to be harvested in the second half of September. The carry forward stocks are especially lower in this region due to around 35 percent lower crop in 2015-16 season. According to ministry of Textile at 35 lakh spindles, Punjab is the third largest cotton consuming state after Tamil Nadu and Maharashtra. Punjab state has 6.6 percent of the total installed capacity in India. As a result, any uncertainty in crop in this part of the country will end up keeping the prices higher in other parts as well.
In the near term Indian prices will remain supported even if the global prices were to go down. Sharp decline in global prices will eventually result in higher imports and cap the prices later in the season. Recent surge in crude oil prices to around $50 per barrel level has also turnout as a supportive factor for cotton yarn prices.
(By Commoditiescontrol Bureau; +91-22-40015533)
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