India cotton production to hit record levels, consumption to weaken

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MUMBAI (Commodity Online): Cotton production in India is expected to hit record production of 36 million bales (1 bale= 170 kg) in 2011-12, but consumption is expected to be lower.

Weak demand from the US and Europe due to economic slow down and dimnished buying by domestic industry due to financial crunch are the reasons for subdued outlook on mill consumption.

Good weather conditions in the cotton growing regions of India might Lead to a record harvest in 2011.

According to South Indian Mills’ Association (SIMA), currently, the Indian textile industry has been subjected to a loss of over Rs 15,000 crore due to high volatility in cotton and yarn prices.

Around 12 million bales of the 36 million bales would be available in domestic market.This means surplus supply for the domestic consumption, creating depression in the cotton prices, industry officials said.

“There is going to be a down-side pressure on prices as the consumption will be a major concern with about 12 million bales of available surplus in the domestic markets. Prices may dip to about Rs 35,000 a candy (1 candy = 356 kg) or even below in due course of time,” Ritesh Agrawal,CEO of Wisdom Cottonwas reported by The Business Standard as saying.

Even though exports of cotton were allowed through Open General License (OGL) stream, it is not expected to be robust.The cotton exports are expected in the range of 7-10 million bales this year.

Meanwhile, global cotton production is expected to rise by 8-10% this year, even as consumption by major countries has not climbed; this may force the global price of the commodity to move further down.

On MCX, the cotton October contract traded 0.53% down touching Rs 18710 in the morning trade on 18th October.

 Source: http://www.commodityonline.com/news/India-cotton-production-to-hit-record-levels-consumption-to-weaken-43050-3-1.html

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