1. CCI lowers cotton production estimates on weaker demand

CCI lowers cotton production estimates on weaker demand

The cotton season is almost coming to a close. Based on weak arrivals of cotton and low sales, the cotton corporation of India (CCI) believes that...

By: | Pune | Published: March 21, 2015 1:10 AM

The cotton season is almost coming to a close. Based on weak arrivals of cotton and low sales, the cotton corporation of India (CCI) believes that the cotton output could be much lower than the estimates  issued by the cotton advisory board (CAB). According to the estimates earlier released by CAB, the total production this season could come upto 400 lakh bales. However as per our assessment, the total output may not exceed 360-370 lakh bales, BK Mishra, CMD, CCI said.

For the last 15-20 days, both cotton procurement and sales have been on the lower side, he said. The total procurement till date is around 85 lakh bales and CCI is likely to purchase another 5-10 lakh additional bales, he pointed out.The reason for this is the shortfall from the North as well as the west. There has been a shortfall of 25-50 lakh bales from Gujarat, 3-4 lakh bales from Karnataka and the only excess production has come from Telangana at 60 lakh bales and Andhra Pradesh at 30 lakh bales totalling 90 lakh bales, around 23 lakh bales more than the originally estimated 77 lakh bales by CCI.

CCI has been actively purchasing cotton in states where the market price has fallen below the minimum support price announced by the government. In the past few months, there has been steady arrival of about 2.5 lakh to 3 lakh bales of cotton on a daily basis which has now dropped to some 1.30 lakh bales a day. However, the  spinners are not actively buying cotton as yarn exports have declined considerably, he said.

Most of the purchases this year have been from Andhra Pradesh and Maharashtra, the leading producers after Gujarat. One bale equals 170 kg. During the current season, CCI has spent more than R9,600 crore on purchase of cotton at an average price of R1,060 a quintal.

According to Mishra, the quality of Kapas from Gujarat this year has been affected due to the erratic rainfall resulting in moisture in the cotton and and in Maharashtra farmers have been getting better MSP than Gujarat, he said. In addition to the weak arrivals, the sale is also not picking up, he said attributing March-end as the reason.

CCI has sold around 2.5 lakh bales in April and now maintains that sales may pick up at a later date when prices are much higher. At present, prices are steady or erraticand Kapas is selling at R31,000-32,000 per candy based on the quality. The procurement centres across the country continue to operate although there are little or no arrivals, he said.

Exports, according to Mishra, could touch around 60 lakh bales this season and most of the export is happening to Bangladesh, Vietnam and even China. Exports have also resumed, with 3.2 million bales already estimated to have exported so far. Around 7.7 million bales were exported last year during the same period. Cotton Advisory Board expects cotton exports to stand at 90 lakh bales. However, the industry expects it to be lower at 75 lakh bales.

Meanwhile, the Edelweiss VC Research Cotton Report-March 2015 says the pace of cotton supply in the market is higher this year, due to steady harvest, larger carry in, and higher imports. Prices have remained below the MSPequivalent throughout the season so far. As a result, government has ended up buying close to 30% of the total arrivals so far. As against this last year the prices remained above MSP and hence government intervention was minimal.

There are reports of various stake holders scaling down the crop estimates. Early in the season the crops estimates were above 400 lakh bales, which are now being estimated at below 400 lakh bales.

The crop size is now being estimated at the levels similar to last season despite the larger acreage, the Report states. Due to very low global prices India has seen higher imports early in the season. For the season so far the imports are coming up to around 4.5 lakh bales compared to 2.5 lakh bales last year for the similar time frame. Contrary to supply the demand has been lower this  due to slower exports that are estimated to be down by 58% lower year on year in the season till end of February.

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