High cotton prices weave woes for industry

December 27, 2010

High cotton prices spun out enough problems for the $62 billion textiles industry, but weaved gains for growers and traders in 2010.

Amidst pulls and pressures from the conflicting interests, a ministers' group under the guidance of Finance Minister Pranab Mukherjee kept reviewing the price and crop situation, with excessive winter rains playing spoilsport.

The textiles industry pulled out all stops to lobby with the textiles, commerce and finance ministries seeking a ban on cotton exports. But Agriculture Minister Sharad Pawar had a different take — hardening of cotton prices in the global market is a God-send opportunity for the farmers. Why not allow them to avail of it at least till February, Mr. Pawar argued.

Collective ministerial wisdom seems to have prevailed and a middle path was chosen to allow exports of up to 5.5 million bales.

Prices shot up in the international market because of the demand-supply imbalance, driven mainly by an increase in consumption in China and poor harvests in Pakistan due to floods.

The global trend was reflected in the local ‘kapas mandis' as well. The natural fibre has remained in short supply since April, but prices shot up by 90 per cent in the last five months. A cotton candy (356 kg each) was sold at an all-time high of Rs.45,000 in October in the domestic market, according to industry officials. The government intervened by way of capping cotton exports at 5.5 million bales and cotton yarn at 720 million kg. But it did not help cool prices.

The industry found everything wrong with the policy of allowing exports and the apparel units even downed shutters in protest on November 19.

However, it described the developments as good for farmers, many of whom have switched to the genetically modified Bt Cotton variety.

“The year was exceedingly good for farmers, whose production cost had already declined substantially because of the use of Bt Cotton seeds,” Confederation of Indian Textiles Industry (CITI) Director General D. K. Nair said.

Total textiles exports managed to grow by 11.5 per cent to $7.57 billion year-on-year during April-July 2010-11, supported by a pick-up in demand in Western markets, where the bulk of the consignments are shipped.

Exports contribute a little over one-third of the total revenue of the textiles industry. The Textiles Ministry had fixed a $25-billion target for 2010-11 against $22.41 billion in the last fiscal.

Garment exporters, who contribute about half of the total textiles exports, continued to face a demand slump. Apparel exports declined by an annualised 6 per cent to $5.75 billion between April and July. However, things seem to have been improving since August.

“In the first few months of the current fiscal, the trend was negative mainly due to less number of orders from our traditional markets. Although the rate of decline has reduced now, the demand is yet to pick up,” Apparel Export Promotion Council Chairman Premal Udani said.

Despite the problem of high raw material costs, total textiles production rose by 10 per cent to about 70,000 million sq. m. in 2010 as compared to the previous year.

As per the estimates of the Textiles Ministry, cotton production in 2010-11 is likely to be 325 lakh bales. But it remains to be seen whether production can reach this figure in the wake of excess winter rains in the key growing areas of Maharashtra and Gujarat.

http://www.thehindu.com/business/Economy/article995870.eke

SICA estimates for 2010-11 lower than 2009-10

Tuesday, December 28, 2010, 19:49[IST]

The South India Cotton Association (SICA) has estimated the cotton crop for the 2010-11 season at 308 lakh bales (of 170 kg each) as compared to an estimate of 309 lakh bales (of 170 kg) during the 2009-10. 

Cotton Advisory Board's (CAB) has given an estimate of 325.48 lakh bales which is also slightly higher than the estimate it had given for 2008-09 at 309 lakh bales.

There has been a decline in the projections by SICA as compared to last year. The reasons for the decline is the rough weather and unfavourable climatic conditions which have led to floods and heavy winds thereby damaging the crop. Commenting on the seasonal plight , Mr K.N. Viswanathan, Honorary Secretary, SICA said that, "Damage due to unseasonal rains, flooding in cotton tracts and heavy wind could have damaged the standing crop. Now, winter has started."

As per the Group of Secretaries meeting held in December, the output is expected to be 290 lakh bales during 2010-11. Commenting on the cotton output textile industry sources said that, "The erratic monsoon and floods in the major cotton producing States such as Andhra Pradesh, Maharashtra and parts of Gujarat have seriously affected cotton production. We expect the production to hover around 290 lakh bales."

A comparison of the CAB estimate with the cotton association's estimate revealed a decline in production estimates in every cotton growing State except Punjab, Haryana and Rajasthan, where the CAB had estimated the crop size at 36.77 lakh bales, while the current year estimate of SICA is higher at 44 lakh bales.

 

 

http://money.oneindia.in/news/2010/12/28/sica-estimates-lower.html

Pakistan appeals for Indian help on cotton front

P Sundarrajan

The Hindu Farmers dry raw cotton. File Photo

With Pakistan reeling from the after-effects of floods, its textile mill sector has appealed to India to honour the commitments for dispatching raw cotton in letter and spirit.

As the floods had devastated large tracts of farm land, cotton production in Pakistan has been affected along with most other major crops. In such a situation, Pakistani textile mills not only require the contracted cotton from India, but a liberal gesture in the form of additional raw cotton as well.

Addressing a press conference here, All Pakistan Textile Mills Association Vice Chairman Shahzad Ali Khan pointed out that India had managed to export only one lakh bales out of the contracted quantity of 10 lakh bales. What the Pakistan industry needed was not just the entire contracted amount but an additional quantity. India has so far exported about 30 lakh bales of cotton to other countries and was in a position to assist the Pakistani textile industry.

Expressing the hope that balance quantity of nine lakh bales would be shipped out at the earliest, Mr. Khan said Pakistan was faced with a severe supply crunch on the raw cotton front due to floods in parts of cotton growing areas in the country. It is estimated that Pakistan lost about 25 lakh bales of cotton due to the floods and faces an overall deficit of 40 lakh bales.

Urging India to “help a neighbour’’; he expressed the hope that the balance quantity of nine lakh bales would be shipped out at the earliest.

The Pakistan Textile Mills Association, he said, had already submitted a request in this regard to the Indian High Commission in Islamabad. A similar plea has been lodged with the Pakistan High Commission with the hope that it would be followed up with the Indian industry and the Government. Desperate for succour from India, the Pakistani textile industry has also taken up the issue with the cotton exporters in Mumbai.

 

 

http://www.thehindu.com/sci-tech/agriculture/article995769.eke

China gets Gujarat cotton cheaper than TN mills

M.R. Subramani

Chennai, Dec. 27

Chennai-based Loyal Textiles pays Rs 82,500 to get 150 bales (170 kg each) of cotton from Gujarat, country's top producer, to one of its mills in Tamil Nadu by ship. One of its competitors in China gets the same quantity cotton from Gujarat at Rs 22,500!

"Even if you add the cost of getting cotton to the ports at Rs 12,500 and port handling charge of Rs 12,000 for shipments to China, it still works out cheaper," said Mr Anand Poppat, Vice-President of Saurashtra Ginners Association. "By road, sending cotton to Tamil Nadu costs as much as Rs 90,000 for the same quantity," he said.

"Truckers demand higher rates since the roads are bad. Mills in South India can get cotton cheaper from North Africa than Gujarat," said Mr D.K. Nair, Secretary-General of Confederation of Indian Textiles Industry.

"Most of the mills in Tamil Nadu are getting cotton through the Shipping Corporation of India vessels. The corporation works out the cost based on road transport rates," said Mr Manickam Ramaswamy, Managing Director of Loyal Textiles. "The problem is that shipping within our ports can be done only by Indian-owned companies. The Cabotage law prohibits shipping from Indian port to another by vessels of foreign firms," he said.

The industry has been seeking changes to the law but those opposed point to various problems, including monitoring movement of foreign vessels within Indian waters.

"If a foreign vessel is allowed to carry cotton from Gujarat to say Tuticorin, I can get the consignment shipped for $200-300 (Rs 10,000-13,600)," said Mr Ramaswamy.

"Ships that bring containers to our ports with chemicals and other consignments have to return empty if they don't get any orders. Instead of returning empty, they offer to ship cotton at cheaper rates," said Mr Nair.

Freight charges are highest to Turkey at around Rs 82,000 but still work out cheaper than moving from one Indian port to another or by road. "

 

 

http://www.thehindubusinessline.com/2010/12/28/stories/2010122853310100.htm

Why Cotton Prices Will Not Go Down

  

December 7, 2010

By Dr. O. A. Cleveland
Professor Emeritus, Mississippi State University
For Bayer CropScience

Cotton prices have enjoyed the most fantastic run in history, having jumped more than 100 percent in less than six months. While prices are off their record 157.23 tick, they will remain strong well into 2012, with excellent possibilities to keep the run going into 2013. The new crop December (December 2011) will once again move above the one dollar level and could reach into the one dollar plus, i.e., the “teens.”

Return to 1970 and Russia’s political decision to upgrade its people’s diet. In 1973 the country suffered its worst wheat crop failure ever. Needing feed for livestock to maintain its promise to upgrade the country’s diet, the Russian government sent representatives to the U.S. and over a single weekend purchased much of the U.S. wheat crop. The exchange opened Monday morning and no one could understand why the wheat market immediately jumped to limit up — a trend that continued for several days. Then the traders learned that the Russian buyers had gone to every wheat exporter of substance the prior weekend and purchased “all" the U.S wheat crop.” After much uproar, wheat, little

more than a $2.50 per-bushel commodity, jumped well above $6.00. Other field crops received a small boost in price, but wheat was the real story as that was the only commodity in a deficit production quandary. Too, that supply/demand situation was resolved and the price rations of world field crops came back in line. Remember, Russia was feeding about 130 million people

Fast forward to 2000 and both China and India have made the political decision to upgrade its people’s diet. The Chinese selected pork and the Indian government selected poultry — remember animals need grain. These two countries are feeding well more than one BILLION people — ten times that of Russia’s 1973 needs. In the process China has become the world’s largest importer of both corn and soybeans (they already were the world’s larger importer of cotton). Further, the U.S. made a political decision to use corn as the feedstock to produce ethanol. The mid -2000s also saw significant oilseed and wheat crop disasters, (Europe and Australia, respectively). Thus, the world was on the brink of a food disaster by the 2005. The demand for oilseeds, feed grains and food grains had jumped well above the supply and prices had to skyrocket. Yet, cotton had the largest supply of stocks on record. Presto, price ratios moved immediately in favor of grains and oilseeds, leaving cotton acreage to plummet.

The world is no longer on the brink of a food disaster, but supplies remain tight. The world has used its surplus of cotton supplies — taking five years to do so. All this says is that economics works. With cotton supplies used the market has to catch up with the grains and oilseeds. More specifically, the price ratios between the various field crops have to come back in line. That is what dollar (plus) cotton has done. Yet, the world cotton supply cannot be rebuilt in a year. Neither can the oilseed and grains stocks as we are seeing. Cotton is now on a competitive tract for acreage and will remain so for at least two years and specifically until all the commodities can rebuild supplies.

The next step will be for additional land to be brought into production — and there is plenty of it. Yet, that will take some 5 to 10 years. In the meantime cotton has joined the party and will see many more months of the magic dollar sign. 

http://www.cotton247.com/news/cg/?storyid=1714

Indian official cotton estimate to arrive in mid JanuaryDecember 23, 2010 (India)

Cotton Advisory Board’s (CAB) revised estimate to be available in mid January-2011. The CAB is a government of India constituted body consisting of about 57 members which includes, Ministry of Textiles, Agriculture Ministry, Departments of Agriculture of various cotton growing states, representatives of ginning, trading, spinning sectors, etc. CAB overseas the cotton production estimate and makes the official estimate. 

The last meeting of the CAB was in August 2010. It should have met this month, but due to the holiday season, the next meeting will be around mid January 2011. At this next meeting, an official revised estimate for the 2010/11 season will be available. On December 22nd, an official from the Ministry of Textiles, India informed about the possibility of next report about mid January. According to a source, there have been losses due to weather related issues in the States of Andhra Pradesh and Gujarat. So far only rough estimates on the cotton losses are available. Rough estimates indicate that 100,000 bales were damaged in the State of Andhra Pradesh. Gujarat might have lost 200,000 to 300,000 bales. Karnataka state might have lost 57,000 bales. Estimate for the loss in the state of Maharashtra is not available yet. 

Mr. Subhash Grover, Chairman and Managing Director of Cotton Corporation of India spoke to this scribe on December 22nd and concurred that the next estimate from CAB will be available during mid January when the board is expected to meet. He also advised that the CAB will provide a revised estimate. 

Any decision to allow additional export over the already approved limit of 5.5 million bales will be made only by the Group of Ministers involving Agriculture, Textiles, Commerce and Finance upon the recommendation from the group of secretaries of these ministries. He is of the opinion that government would allow the export of already committed maximum quota of 5.5 million bales. Decision will be expected soon on the export of un-exported quantity once the data is verified, according to Mr. Grover.

Seshadri Ramkumar, Texas Tech University

 

 

http://www.fibre2fashion.com/news/textile-news/newsdetails.aspx?news_id=94228