India. Cotton and Products Update April 2013 May 10, 2013
2012/13 cotton production is estimated higher at 34.0 million 170 kg bales (26.5 million 480 lb bales / 5.7 mmt). The Cotton Corporation of India has released 25,000 170 kg bales for sale in the domestic market, but interest among buyers was poor. Cotton exports in April were the lowest since October 2012, but 2012/13 exports are expected slightly higher at 7.2 million 480 lb bales. Indian mills have reportedly secured significant volumes of foreign cotton for import. Cotton imports could lower Indian cotton prices just as farmers are making their planting 2013 planting decisions.
2012/13 Production Higher
On April 17, 2013, the Cotton Advisory Board (CAB) in its meeting revised the cotton production estimate for MY 2012/13 to 34.0 million 170 kg bales (26.5 million 480 lb bales / 5.7 mmt). That revised estimate is included in this report in keeping with the prior practice of adopting CAB production estimates as historical estimates. Through April 30, cotton arrivals had reached 29 million 170 kg bales, almost even with the year-ago pace and three percent behind the 2010/11 pace. To the extent that the pace of arrivals is a predictor of production, it appears that the late monsoon and late-season storm in Andhra Pradesh were not as detrimental to yields as initially expected. Cotton planting will begin in May in Punjab and Haryana, regions with irrigation, while sowing in the rest of the country will begin with the onset of the monsoon rains in June. According to the Indian Meteorological Department forecast, India is expected to receive normal monsoon rains (June - September).
CCI Stocks, Imports and Planting Intentions
The Cotton Corporation of India (CCI) is currently holding 2.1 million 170 kg bales (1.6 million 480 lb bales / 357,000 mt) of unsold stocks. On April 26, 2013, CCI started the process of releasing the stocks by auctioning 25,000 170kg bales (19,520 480 lb bales / 4,250 mt). CCI and the textile industry have reportedly been seeking the release of the stocks for several weeks. However, initial interest in the auction was limited and CCI does not currently have permission to auction more than 25,000 bales. Nearly all of the cotton is in Andhra Pradesh which is relatively close to the major textile area around Coimbatore in Tamil Nadu, but there are reported concerns about the quality of the CCI cotton. While CCI maintained high procurement standards despite the damage from the late-season storm in Andhra Pradesh, the micronaire value is reportedly not as high as spinners would like. The longer CCI hangs on to these stocks, the greater the likelihood that future auctions will depress prices just as farmers are making their 2013/14 cotton planting decisions.
Seed cotton prices have dropped to the lowest level since February, seemingly in response to the CCI auction and the CAB’s expectation that 1.7 million 170 kg bales will be imported between May and September (2.5 million 170 kg bales for the entire 2012/13 Oct/Sep marketing year). Trade estimates of the amount of foreign cotton that has been secured range from 1.0 to 1.7 million 170 kg bales. Larger volumes of imports are expected to begin in either May or June, well ahead of the surge in imports that took place prior to the onset of the 2012 harvest. An analysis of India’s monthly cotton supply and demand position using CAB stock levels and higher USDA-Washington stock levels suggests that respective cotton supplies are either a relatively comfortable 8.8 or 11.2 million 170 kg bales as of May 1. Given adequate supplies, reduced exports, and the potential for more CCI stocks to be auctioned, FAS Mumbai believes that the bulk of imports will occur during the start of the 2013/14 (July/June) marketing year. If that analysis proves incorrect, a surge in imports at planting, especially if coupled with continued CCI auctions, could drive seed cotton prices lower and reduce planted area.
Export registrations have reportedly reached 8.9 million (6.9 million 480 lb bales / 1.5 mmt) bales with shipments surpassing 8.5 million 170 kg bales for MY 2012/13. FAS Mumbai has revised the export forecast to 9.2 million 170 kg bales (7.2 million 480 lb bales / 1.6 mmt) for MY 2012/13 (Aug/Jul). Exports in April were significantly lower as exports to China came to a near halt.
Consumption remains steady on account of strong demand for yarn from China and Bangladesh. Yarn export registrations for February have risen by more than 35 percent on a year-to-year basis. Spinning margins have reduced slightly but industry continues to enjoy good margins. Domestic mills are also looking to cover their cotton requirements for the remaining season. Trade sources indicate that larger mills are looking to cover supplies between 2-3 months with smaller mills only covering for a month