MUMBAI (Commoditiescontrol) - U.S Department of Agriculture (USDA) revised the cotton area forecast for MY 2016-17 (Aug-Sept) to 11.2 million hectares which is almost a 6 percent reduction from the previous year. Despite a good monsoon, farmers have shifted area to food crops. This is attributed to expected market revenue, support, and policy advocacy issued by central and state governments to plant pulses, oilseeds, maize, and other agro-forestry products. In addition, farmers report concern with persisting pest pressures and rising input costs.
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The drop in planted area will be partially offset with anticipated higher yields, but not enough to increase overall production. As such, the FAS Mumbai production forecast is 27 million 480 lb. bales (34.5 million 170 kg bales/ 5.86 mmt) which is a 500,000 480 lb. bale reduction from the USDA official forecast. For MY 2016/17, crop yields are estimated at 524 kg/hectare, slightly higher than three year average.
2015 Crop Arrivals Near Complete
Cotton Corporation of India (CCI) arrivals by July 27 reached 26.17 million 480 lb. bales (33.52 million 170 kg bales/5.69 mmt). Arrivals are almost 99 percent of the total MY 2015 production estimate of the Cotton Advisory Board with another two months remaining in the season. CCI is estimated to be holding around 19,520 480 lb. bales (25,000 170 kg bales). In MY 2015, CCI procurement under MSP program was around 659,126 480 lb. bales (844,163 170 kg bales /143,508 mt).
On July 16, 2016, the Ministry of Textiles issued a press release informing that the recent spurt in cotton prices has resulted in higher input costs for the spinning sector. Consequently the Cotton Corporation of India will sell its existing stock, purchased under MSP, to spinning mills in the Micro, Small and Medium Enterprises (MSME) category only. This would be for such MSME spinning textile units registered with the Office of Textile Commissioner. For details refer here. Small mills typically do not have the capacity to maintain stocks and procure small quantities of cotton on a daily basis. Keeping in view the current market prices, CCI has been mandated to sell its remaining stock to these small units.
Cotton Advisory Board revised MY2014 & MY2015 estimates On July 13, 2016, the Cotton Advisory Board (CAB) revised the MY 2014 and MY 2015 cotton balance sheet. FAS Mumbai has updated the area and production estimates to reflect the CAB figures for MY 2014 and MY 2015.
Export-Import
FAS Mumbai MY 2016/17 exports are forecast at 4.5 million 480 lb. bales (5.7 million 170 kg bales/980,000 mt). Exports in MY 2016 are expected to be lower than MY 2015 as buyers in traditional markets of Pakistan and China look towards their respective domestic supplies for consumption. Indian merchants and exporters however are increasingly diversifying trade to newer markets such as Indonesia, Taiwan, Turkey and Thailand though their dependence on Bangladesh and Vietnam remains high.
For MY 2015, exports are forecast unchanged from the USDA official estimate at 5.8 million 480 lb. bales (7.42 million 170 kg bales/ 1.26 mmt) based on trade data (refer table 2a). In June almost half of the total cotton shipments exported were from ports in Gujarat. Shipments mostly consisted of the current year’s crop of 29 mm Shankar-6. Top export destination for June shipments were Bangladesh followed by Vietnam and China.
The FAS Mumbai MY 2016/17 import forecast is 1 million 480 lb. bales (1.2 million 170 kg bales/218,000 mt). Trade sources indicate large orders have been placed for imported cotton as domestic supplies tighten and the available domestic cotton is priced higher than imported cotton.
In MY 2015, imports are forecast at 1.025 million 480 lb. bales (1.31 million 170 kg bales/ 223,000 mt) based on trade data (refer table 3). June imports consisted of large volumes of West African cotton (45 percent) followed by American pima cotton (28 percent) and the new 2016 Australian cotton crop (11 percent). July shipments were slightly higher than the previous month. More than 65 percent of imported shipments were destined for southern India indicating mills needed to cover their near term requirements. Most shipments into southern India were West African cotton (70 percent) followed by American and Australian cotton.
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Consumption
FAS Mumbai forecasts MY 2016 consumption slightly higher than the USDA official forecast at 24.2 million 480 lb. bales. With global demand for cotton products not keeping pace with man-made fibers, consumption is expected to be essentially flat from the previous marketing year.
Since August 2015, seed cotton prices have climbed 44 percent. In addition, ginned cotton prices rose 31 percent from 68 cents per pound in August 2015 to 89 cents per pound. Industry sources report this is affecting the profitability of the industry. As a result, mills will need to import cotton from the world market rather than wait for the Indian crop that is harvested in late October. Small to medium-sized mills that typically don’t have coverage for more than a few weeks report that they are not sourcing domestically as buying at current prices is not viable. Instead, these small and medium-sized mills are opting to import from West Africa, United States and Australia. Based on a year-on-year comparison of textile consumption data, there is a reduction of 1 percent from the August to May period. The average monthly consumption for 2015 remains at 1.9 million 480 lb bales (2.49 million 170 kg bales). Even the most traded 30s count spun cotton yarn prices since October
2015 have risen by 19 percent.
(By Commoditiescontrol Bureau; +91-22-40015533)
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