Monthly Prices Movement

  • Cotton prices overall remained positive during the month of August in the various markets across the country due to tight supplies as rain in major growing areas had restricted new crop arrival.

  • Mills and spinners preferred to stay on the sideline as they were not interested in striking new deal as the higher prices were hurting their profitability margin.

  • Domestic buyers stayed away from buying Cotton yarn as they have enough stock, while international buyers were sourcing it from cheaper destinations during the month.

Ground Report

  • Cotton Association of India (CAI) has projected India's 2016-17 Cotton crop estimate at 33.6 million bales, unchanged from August forecast.

  • CAI pegged total Cotton supply for the crop season 2016-17 at 39.8 million bales and domestic consumption at 30.9 million bales, leaving an available surplus of 8.9 million bales.

  • Cotton output in India is expected to be higher owing to good rainfall at various Cotton sowing belts across the country despite low sowing acreage.

  • Gujarat is expected maintain production of 8.8 million bales in 2016-17, Maharashtra's output is expected to improve to 8.7 million bales, while Telangana and Andhra Pradesh is estimated to produce lesser crop this year at 4.8 million bales and 1.55 million bales, CAI said.

  • India's Cotton yields have fallen from 566 kg per hectare in 2014 to 504 kg in 2016 which is already among the worlds lowest, due to delayed rains and pest problems in Northern India and pink boll-worm attacks in Gujarat.

  • The U.S Department of Agriculture (USDA) forecasts India's 2016/17 Cotton production at 26.5 million 480-pound bales. Yield is forecasted at 529 kilograms per hectare, on par with the 5-year average and up from 483 kg/ hectare last year.

  • India Cotton exports declined gradually to around 6.640 million bales during October-June (2015-16), whereas imports have recorded significant growth same period of current Cotton marketing season.

  • Cotton exports from India in 2016-17 season is likely to fall to the lowest level since 2008/09 due to lower beginning stocks, an expected drop in imports by Pakistan, and a likely continued loss of market share in China.

Policies

  • Indian government forecasts Cotton output to be around 32.1 million bales (170 kg each) in its first advanced estimate for 2016-17, higher by 6.23% from 2015-16.

  • Cotton sowing so far in India reported lower by 11.58% at 10.26 million hectares according to the government data as on September 23.

  • China state reserve completed its target of 2 million tonnes and now reportedly expected to auction further 0.5 million tonnes reaching a total of 2.5 million tonnes of Cotton up to September 30.

Global

  • World Cotton demand is likely to continue to exceed production for the second straight year in 2016-17, according to the International Cotton Advisory Committee (ICAC).

  • ICAC estimates world Cotton consumption to remain stable at 23.8 million tons in 2016-17 while world production is projected to increase by 6% to 22.5 million tons.

  • For 2015-16, world ending stocks are estimated to have fallen by 13% to 19.5 million tons and ending stocks in 2016-17 is pegged at 18.1 million tons by ICAC.

  • The U.S Department of Agriculture (USDA) has forecasted world Cotton production in 2016/17 at102.5 million bales and global Cotton use at 111.2 million bales.

  • China's 2016/17 Cotton crop is projected at only 21 million bales, the lowest production estimate since 2000/01 by USDA.

  • China’s raw Cotton shipment in August declined 26.68% to 69510 tonnes as per China Customs statistics. During the period from January to August imports totalled 594510 tonnes.

  • China's Cotton imports are likely to fall further during the rest of 2016 as the central government will continue to sell the state reserve. New arrivals, expected to start from October, will also probably dent the demand of yarn mills for imported Cotton.

  • China is likely to be the largest Cotton consumer in 2016/17 despite an expected decrease in mill use of 3% to 7.1 million tons, which would be the seventh consecutive season of contraction.

  • China is increasing Cotton yarn imports mainly from Vietnam as Chinese investors have invested huge amount of finance in textile industry due to cheap labor availability along with other benefits.

  • Pakistan's production of Cotton is estimated to rise to nearly 8.3 million bales in 2016/17 based on a rebound in yields that are forecast above average at 748 kg per hectare.

  • Pakistan's Cotton Crop Assessment Committee (CCAC) slashed Cotton production estimates by 20% to 11.27 million bales against the initial estimates of 14.1 million bales.

  • Bangladesh imported 207,644 tonnes of Cotton yarn from January to July this year, according to Bangladesh Textile Mills Association (BTMA).

  • Vietnam imported 103,139 tonnes of Cotton worth $172.1 million in August according to latest data released by the Vietnam Customs. Cotton imports from January to August totalled 712,416 tonnes and year to date Cotton imports recorded at 89,941 tonnes, valuing $130.46 million.

Outlook

  • Activity in the market is slow as buyers are on the sideline as they are awaiting price to fall further after new crop supply. Though supply has already started in the country, but the pace is very slow, but likely to increase after mid October in full form.

  • Mills are expecting prices to decline from next month onwards as new crop from other states likely to pick up momentum, however peak arrival may commence only from next month-end.

  • Dull demand in the yarn market was another impacting factor which led the mills to wait and watch as they are facing disparity of around 10-15% in the yarn market.

  • Traders have their eyes on October, as a large part of the Cotton-growing areas are still experiencing rains. Situation is uncertain at this point. Cotton prices are not likely to stay high for long and may correct sharply after November 15.

  • This year, opening season prices could be Rs 43,500 per candy in October, compared with Rs 34,000 per candy last year.

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