Cotton stocks seen shrinking on lower output, higher offtake

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CHENNAI, NOV. 1: 

A three per cent drop in global cotton production and a three per cent rise in consumption this season ending July will likely result in a 29 per cent drop in carryover stocks for the next season.

According to Cotton Outlook, global production this year is expected to be lower at 25.93 million tonnes (mt) against 26.73 mt last year. The projection is nearly 0.65 mt higher than the estimates made last month.

The higher projection comes mainly on better crop prospects in India and China.

The outlook estimates cotton production in India at 340 lakh bales (of 170 kg each) or 5.78 mt against 325 lakh bales or 5.53 mt projected last month.

Last season, the country produced 5.86 mt or 345 lakh bales.

China’s crop, too, is seen higher at 6.94 mt against 7.2 mt last year. Last month, it was estimated at 6.74 mt.

Cotton production in Pakistan has been estimated higher at 2.17 mt against last year’s 2.21 mt. The production was seen at 2.09 mt last month.

Cotton output this year is likely to be lower in almost all major producing nations barring Uzbekistan and the African Franc zone. The outlook has projected global consumption at 22.10 mt against and 21.40 mt last year. It was seen at 21.98 mt last month.

While Chinese consumption is seen lower at 7.6 mt (7.8 mt last year), the offtake in the subcontinent, including Pakistan and Bangladesh, is likely to be higher at 7.73 mt, up from 7.70 mt projected last month.

It is also more than last year’s consumption of 7.09 mt. Consumption is projected higher in Brazil, the US and Turkey too.

As a result, the carryover stock for the next season is seen at 3.83 mt against last year’s 5.33 mt. Last month, the carryover stock projection was 3.29 mt.

Cotton prices in the global market have dropped by a fourth this year making the natural fibre one of the under performers. On Thursday, cotton for delivery in December was quoted at 70.07 cents a pound.

Cotton had run to a record $2.17 a pound in March last year.

In the domestic market, Shankar-6 cotton that is in demand for exports is currently ruling around Rs 34,000 for a candy of 356 kg.

In March last year, it had soared to nearly Rs 63,000 a candy.

Lower returns for farmers is one of the reasons for the drop in production as they have shifted to other remunerative crops.

Source: http://www.thehindubusinessline.com/industry-and-economy/agri-biz/cotton-stocks-seen-shrinking-on-lower-output-higher-offtake/article4055081.ece

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