By Thomas Kutty Abraham - Dec 9, 2010 3:07 PM GMT+0530 Thu Dec 09 09:37:00 GMT 2010
Cotton output in India, the world’s second-biggest grower and exporter, may miss an earlier estimate because of unseasonal rainfall in the main producing regions, a textile mills group said.
Output in the year started Oct. 1 may be 29.5 million to 30 million bales of 170 kilograms each, compared with 32.5 million bales estimated by the Cotton Advisory Board, D.K. Nair, secretary general of the Confederation of Indian Textiles Industry, said in a phone interview from New Delhi today.
A lower crop may prompt India to retain restrictions on exports, bolstering global prices that have rallied 72 percent this year. Cotton reached $1.5195 on Nov. 10, the highest price since trading began 140 years ago, as adverse weather damaged crops in China, Pakistan and the U.S.
“There’s a near-consensus that the crop will be below 30 million bales this year after the unseasonal rains and floods in some areas,” Nair said. “A lower crop should prompt a review of the surplus availability and the export strategy.”
India’s textiles ministry Oct. 11 halted registration of new export contracts after it got applications to ship 5.5 million bales, the maximum permissible this year. Louis Dreyfus Commodities, the top trader of cotton, and Cargill Inc. are among companies that won permits.
Shipments Capped
There may not be more than 3 million bales available for export as rains last month in Gujarat, Maharashtra and Andhra Pradesh, the biggest growers, damaged crops, Nair said. Shipments may total 2.5 million bales, less than 5.24 million bales permitted by the Textiles Ministry for export by Dec. 15, Nair said.
The South Asian nation, a major supplier of cotton to China, will cap shipments of yarn at 720,000 metric tons in the year started Oct. 1 to bolster domestic supplies, the government said last week.
“There has to be some predictability about government policy related to cotton,” Nair said. “Any review of export policy should be based on actual crop size.”
Futures for March delivery fell 1.7 percent to $1.3002 a pound on ICE Futures U.S. in New York today. The commodity is set for its biggest annual gain since 1973, according to Bloomberg data.
Demand in China is forecast to outpace supply by 17 million bales in the year ending July 31, the U.S. Department of Agriculture forecast on Nov. 9. Stockpiles in the U.S. are predicted to fall to 2.2 million bales this season, down 25 percent from 2.95 million last year. A bale in the U.S. weighs about 480 pounds, or 218 kilograms.
Consumer Resistance
“Global availability isn’t likely to improve anytime soon and that may be seen as supportive for prices,” Nair said. “But prices have reached a peak where consumer resistance will come into play,” he said.
Cotton arrivals in India this year have lagged behind last year’s levels after rain slowed harvests in the main growing region. Arrivals were 7.02 million bales by Dec. 5, compared with 7.21 million a year ago, Cotton Corp. of India said Dec. 6.
India’s post-monsoon rainfall in October and November was 17 percent higher than the level deemed normal for that time of the year, according to the weather department.
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