Cotton

Cotton all set to reappear on list of essential commodities!
20 Jun 2008 12:10 pm

Mumbai - Cotton prices are sharply higher despite huge production in the country, heavy exports have reduced its availability in the domestic market and millers are finding it difficult to procure cotton even at higher prices. In these circumstances, the government is considering to put cotton on the list of 'essential commodities'.

A senior official in the Cotton Corporation of India (CCI) said that the government, keeping in view the current higher prices of cotton, was considering to bring cotton under the purview of Essential Commodity Act once again. The government, through an amendment, had removed cotton from the list of essential commodities the previous year. In fact, cotton was excluded from the list looking at its huge production and smooth supplies in the country.

However, despite huge production of 3.15 crore bales of cotton during the current year, the country is facing a shortage of cotton and its prices are touching new highs every day. The decreased output of cotton across the world is having its adverse effect in the domestic market.

According to the US Department of Agriculture (USDA), the world cotton output is likely to decline by almost 20 lakh bales to remain at 12 crore bales during the current year. Whereas the world cotton demand is expected to rise by 11 lakh bales to remain at 12.44 crore bales. The last stocks of cotton are therefore likely to short of around 13 lakh bales due to this increased demand and reduced supplies.

Demand and Supply of Cotton (India and World)

All figures in crore bales (1 bale = 480 pound)

Production


2003/04
2004/05
2005/06
2006/07
2007/08
June 2008/09

India
1.4
1.9
1.9
2.18
2.53
2.65

World
9.67
12.14
11.65
12.2
12
11.64

Domestic Demand

India
1.35
1.48
1.67
1.81
1.85
1.9

World
9.8
10.86
11.62
12.33
12.44
12.71

Exports

India
0.07
0.066
0.34
0.45
0.63
0.75

World
3.32
3.5
4.45
3.71
3.82
4.08

Last Stocks

India
0.41
0.87
0.8
0.76
0.85
0.89

World
4.82
6.06
6.23
6.31
6.18
5.4


Source: US Department of Agriculture



Exports of cotton from India have gone up sharply due to less supplies and increased demand in the world. According to an estimate of the Cotton Advisory Board, cotton exports from India is are expected to surge by 58 lakh bales to remain at 85 lakh bales. On the other hand, traders believe that the total exports from India will be of more than one crore bales of cotton.

Demand-supply of cotton in the domestic market

All figures in lakh bales (1 bale = 170 kgs)


2007-08
2006-07

Supplies

Opening Stocks
47.5
52

Production
315
280

Imports
6.5
5.53

Total Availability
369
337.53

Demand

Mill Consumption
203
194.89

Consumption by small mills
23
21.26

Non-Mill consumption
15
15.88

Total Consumption
241
232.03

Exports
85
58

Carry-Forward Stocks
43
47.5


Source: Cotton Advisory Board



Due to the huge exports and increased domestic consumption, the unsold stocks of cotton (the current stock with ginners) in the country is only 13 lakh-14 lakh bales, which is half of the monthly domestic consumption. The current low stocks and estimates of declined production of cotton in the world next season have lifted prices of S-6 variety of cotton to Rs 26,000/candy. Last year, the variety was trading around Rs 19,000/candy.

The spinning mills are also facing difficulties due to the higher prices and less stocks. The industry is suffering losses since last one and a half year following strength in Rupee. This is the reason that the mills are demanding sine a long time to ban exports of cotton or impose export duty on it. Presently, there is no duty on cotton exports.

The government has not made any effort to control exports of cotton so far, but it is now considering to re-include cotton in the list of 'essential commodities'. By doing this, the government would be able to control the processing, movement, storage and marketing of cotton in the country. However, this will not have a significant effect on availability of cotton in the country.

According to estimates, world cotton production will decline during the next season, but it will increase sharply in India. This will further result in a remarkable increase in cotton exports from the country. In such a situation, the government must ensure that there is sufficient availability of cotton for domestic mills.

ICE cotton sinks on weather news
20 Jun 2008 10:09 am

New York - ICE Futures US cotton settled sharply lower Thursday as weak outside markets added to pressure from a bearish weather forecast and bullish weekly export sales data.

Traders expect the market to correct by treading lower in the near term.

Most-active December futures settled 198 points lower at 80.07 cents a pound and the nearby July contract settled down 238 points at 71.44.

Futures opened modestly higher before slipping and trading side-to-side through midday. The market then jumped to the December session high of 82.30 before gradually sinking lower. Late-session weakness in Chicago Board of Trade grains and falling commodities markets pulled prices down to session lows. The market trimmed losses ahead of the close.

Forecasts for light rains in the hot, dry West Texas area pressured prices as the timeframe nears for final insurance adjustments, analysts said. On June 20 and June 25, regions of the Texas High Plains that have been claimed as losses by producers will be abandoned and reduce acreage. Rains ahead of and in this timeframe are likely to aid cotton development, adding to, rather than detracting from, acres, analysts said. Scattered-to-widely scattered showers are forecast through Monday, according to DTN Meteorlogix, a private meteorological firm.

Weekly US Upland cotton sales reached a marketing year low in the week to June 12, according to the US Department of Agriculture.

Follow-through losses are expected in Friday's session as the market is due for a correction from recent high prices, said Jack Scoville, vice president of Price Futures Group in Chicago. December futures are likely to probe lower with a downside objective at 77.84, a 50% correction from Tuesday's high to the June 3 low, said Mike Stevens, analyst at SFS Futures in Mandeville, La.

First notice day for July cotton is Tuesday. The ICE cotton trading limit will remain at 4 cents or 400 points during Friday's session as March, one of the two most-active contracts, closed above 84 cents, according to an exchange rule.

ICE daily cotton stocks increased by 4,630 480-pound bales Wednesday to total 1.608 million bales with 58,148 awaiting review.

ICE cotton open interested increased by 346 positions Wednesday to total 222,085, according to the exchange.

Volume was estimated 19,596 lots. In options, approximately 9,547 calls and 4,321 puts traded, according to exchange data.

Close Change Range
Jly 71.44 -238 pts 70.32-74.10
Oct 76.25 -192 pts 75.17-78.45
Dec 80.07 -198 pts 78.96-82.30

Cotton lint stable in west India
19 Jun 2008 5:29 pm

Mumbai - Cotton lint prices became stable after surging for last couple of days at the spot markets across western India Thursday. Traders say, the reducing stocks and surge in yarn prices may keep cotton lint prices up in spot markets. They say, unsold stock of cotton lint across the country is of 13 lakh-14 lakh bales.

At Kadi market in Gujarat, cotton lint S-6 A-grade was quoted at Rs 25,800-Rs 26,000/candy while average-grade traded at Rs 25,500-Rs 25,800/candy.

In Vidarbha region of Maharashtra, the 28-mm cotton lint traded at Rs 25,500/candy while 29-mm cotton lint traded at Rs 25,700/candy.

At Sendhwa market in Madhya Pradesh, the 28-mm cotton lint traded at Rs 25,800-Rs 26,000/candy; 29-mm cotton lint traded at Rs 26,200-Rs 26,500/candy; and 30 mm cotton lint at Rs 26,600-Rs 26,800/candy.

Cotton lint steady in north India
19 Jun 2008 5:25 pm

Abohar - Spot cotton lint prices remained steady at major markets across north India Thursday. Looking at the bullish trend in other parts of the country and consistent demand from millers, ginners are willing to sell the remaining limited stock at higher prices.

Traders say, the reducing stocks and surge in yarn prices may keep cotton lint prices up in spot markets. They say, unsold stock of cotton lint across the country is of 13 lakh-14 lakh bales.

Across Punjab, cotton lint traded at Rs 2,725/maund at Fazilka, Kotakpura, Muktasar and Bathinda; Rs 2,711/maund at Malot and Gidarbha; Rs 2,700/maund at Abohar; Rs 2,690/maund at Manasa; and at Rs 2,740/maund at Rampura, Barnala and Budhaldha.

Cotton lint traded at Rs 2,650-Rs 2,685/maund in Haryana and at Rs 2,520-Rs 2,580/maund in Rajasthan.

Firm prices, low volume seen on cotton market

KARACHI (June 20 2008): Unforeseen fears about the size of cotton production for the coming season kept the prices firm on the cotton market on Thursday, experts said. The Karachi cotton Association (KCA) official spot rate was unchanged at Rs 3800, dealers said.

Mills indulged in forward buying of cotton on rising apprehensions about the production of cotton for the coming season, leading cotton analyst Naseem Usman said.

Besides, shortage of irrigation water was also a big concern because it is causing a delay in sowing. It is feared that the mealy bug may attack the standing crop, they said. Additionally, the mills are also under pressure due to the rising prices, they added.

On Wednesday, New York cotton futures settled firmer on investor short-covering as the market reversed course and the trade digested news of sizeable losses in the top growing state of Texas, brokers said.

The key December cotton contract rose 1.10 cents to conclude at 82.05 cents per lb, dealing from 80.10 to 82.08 cents. Spot July cotton gained 1.01 cents to 73.82 cents, trading from 72.07 to 73.98 cents. Volume traded in the December contract stood at 12,388 lots at 2:51 pm EDT (1851 GMT) while July volume was at 3,576 lots.

The following deals were reported as some 200 bales of cotton from Dherki at Rs 3850 and same figure from Sultanabad at Rs 3800 (August delivery), they said.

================================================== =========
The KCA Official Spot Rate for Local Dealings in Pak Rupees
-----------------------------------------------------------
FOR BASE GRADE 3 STAPLE LENGTH 1-1/32"
MICRONAIRE VALUE BETWEEN 3.8 TO 4.9 NCL
================================================== =========
Rate Ex-Gin Upcountry Spot Rate Ex-Karachi
for Price Sales Tax @ 15%
================================================== =========
37.32 Kgs 3,800.00 50 3,850.00
Equivalent-------------------------------------------------
40 Kgs 4,072.00 50 4,122.00
================================================== =========

Cotton lint advances in north India
20 Jun 2008 3:53 pm

Abohar - Spot cotton lint prices were quoted higher at major markets across north India Friday. Prices went up further looking at the bullish trend in other parts of the country and stronger sentiments among ginners, who are buoyant over consistent demand from millers. Ginners are willing to sell remaining limited stock at higher prices.

Traders say, the reducing stocks and surge in yarn prices may keep cotton lint prices up in spot markets. They say, unsold stock of cotton lint across the country is of 13 lakh-14 lakh bales.

Across Punjab, cotton lint traded at Rs 2,755/maund at Fazilka, Kotakpura, Muktasar and Bathinda; Rs 2,745/maund at Malot and Gidarbha; Rs 2,735/maund at Abohar; Rs 2,730/maund at Manasa; and at Rs 2,770/maund at Rampura, Barnala and Budhaldha.

Cotton lint traded at Rs 2,660-Rs 2,690/maund in Haryana and at Rs 2,550-Rs 2,600/maund in Rajasthan.

Cotton lint mounts up in west India
20 Jun 2008 4:58 pm

Mumbai - After pausing for a day, cotton lint prices moved up further at the spot markets across western India Friday. Traders say, the reducing stocks and surge in yarn prices are lifting cotton lint prices in the spot markets.

Traders say, unsold stock of cotton lint across the country is of 13 lakh-14 lakh bales. This includes six lakh to eight lakh bales in Gujarat, two lakh bales in Maharashtra and one lakh bale each in Madhya Pradesh and Andhra Pradesh.

At Kadi market in Gujarat, cotton lint S-6 A-grade was quoted at Rs 26,000-Rs 26,300/candy while average-grade traded at Rs 25,800/candy.

At Sendhwa market in Madhya Pradesh, the 28-mm cotton lint traded at Rs 25,800-Rs 26,000/candy; 29-mm cotton lint traded at Rs 26,200-Rs 26,500/candy; and 30 mm cotton lint at Rs 26,600-Rs 26,800/candy.

ICE cotton gains on crude oil rise
21 Jun 2008 9:59 am

New York - ICE Futures US cotton settled modestly higher Friday as crude oil gains supported prices in thin trade while weather pressure faded.

Most-active December futures settled 4 points higher at 80.11 cents a pound and the nearby July contract settled up 23 points at 71.67. For the week, December cotton gained 66 points.

December futures opened lower in follow-through buying from Thursday's selloff, touching the session low at 78.45. Futures rallied on the open of the Chicago Board of Trade grains floor, reaching session highs at 80.69. The market slipped back from the highs, but stayed on the upside as short-covering boosted prices ahead of the Tuesday's July contract first notice day. Futures held higher before trimming gains ahead of the close as light traded added to volatility, analysts said.

Rains may have also come too late in the season to make a difference in the crop, said John Flanagan of Flanagan Trading Corp. in Fuquay-Varina, N.C. There were also reports that some rain in West Texas was accompanied by damaging wind and hail, said Sharon Johnson, senior cotton analyst at First Capitol Group in Atlanta.

Texas is forecast to see scattered showers and thunderstorms with below-normal temperatures through Tuesday, according to DTN Meteorlogix, a private meteorology firm.

U.S. cotton acreage was projected lower by private analytical firm Informa Economics, though the forecast didn't appear to affect the market significantly, analysts said.

ICE daily cotton stocks increased by 6,860 480-pound bales Thursday to total 1.615 million bales with 52,289 awaiting review.

ICE cotton open interest decreased by 1,879 positions Thursday to total 220,206, the exchange reported.

Volume was estimated at 13,526 lots. In options, approximately 5,868 calls and 7,827 puts traded, according to exchange data.

Close Change Range
Jly 71.67 +23 pts 70.00-72.90
Oct 76.29 +4 pts 74.80-77.24
Dec 80.11 +4 pts 78.45-80.98

Cotlook A Index (FE)
2007/08 79.05 +1.65
2008/09 83.95 +1.15
U.S. Exports Net Sales
Accumulative 14,882,400
Weekly 43,500
Bangladesh 19,400
Mexico 14,500
Indonesia 11,400
Wkly Shipments 302,800
CCC Loan Outstanding
6,457,924 -378,353
NYK Open Interest
220,206 -31,546
Net Speculators’ Position
Long 1.7% -1.8%
NYK Certificated Stocks
1,615,451 +4,526
Awaiting review 52,289

Brazil - The current 2008 crop is approaching maturity and in some places picking has already started.
Although the crop in Mato Grosso is about 10 days late, expectations are for an excellent result both in
quality and in quantity. Estimates for the total 2008 crop (2007/08 season) are now centered around
1,600,000 tons or 7.35 million statistical bales, which would be a record. Domestic consumption is
expected to reach nearly 900,000 tons, leaving about 700,000 tons for export. In spite of the good result
this year, the general outlook for 2009 is more subdued. Production costs have risen significantly, mainly
due to dramatically increased fertilizer prices and higher transport costs, so at today’s grain prices it may
be more attractive for many producers to plant soybeans or corn. Grains also demand much less inputs
than cotton, which makes them attractive mainly to less well-financed growers. Consequently, there will
almost certainly be a considerable reduction of cotton plantings in Mato Grosso, while the acreage in
Bahia can be expected to be more or less maintained. On the other hand, there is hope for the
government to pay another PEPRO next year, which would mitigate the effects of higher input costs to a
certain extent. Depending on the availability of such a subsidy, total cotton production in 2009 is
expected to reach between 1.4 and 1.6 million metric tons.

.................................................. ................................
Argentina - Enthusiasm once again has surfaced for cotton production, due in part to the government’s
export taxes on grains, giving cotton a competitive advantage. In the past, cotton producers were mainly
small farmers, which is why they have escaped the attention of the government so far. Now, several of
the large production groups are moving back into cotton. Talk is about acreage going up to 600,000
hectares in 2009, potentially giving a crop of 300-350,000 tons. Since the new producers tend to be
richer and more sophisticated, yields could increase over last year. As usual, the big unknown of course
is always the weather. Domestic mills have enjoyed excellent business in 2007/08 reaching 200,000
tons, but conditions have drastically worsened in the last quarter. In part from higher inflation, which is
only partially compensated by weaker currency, production costs have risen; however, it seems spinners
are less optimistic going into 2008/09. Nevertheless, now everybody talks exports again at a level of
200,000 tons and limited imports of 25-50,000 tons.