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USDA GAIN: Oilseeds, Cotton, Sugar, Grain and Feed


06 December 2012

USDA GAIN: India Cotton and Products Update - November 2012USDA GAIN: India Cotton and Products Update - November 2012

India’s 2012/13 cotton production is expected to drop slightly to 25.3 million 480 lb bales as a result of heavy rains and winds in the key producing state of Andhra Pradesh during early November. The Government of India recently announced that export registrations were 450,000 170 kg bales (351,000 480 lb bales/76,500 metric tons) during October and November and it did not plan to alter the current export policy to limit exports. Unofficial trade data suggest that the pace of exports was somewhat higher during October and November and Indian cotton is being exported at competitive prices. 2012/13 exports are now expected to reach 4.5 million 480 lb bales (5.7 million 170 kg bales/980,000 metric tons), a million bales higher than the previous estimate.
USDA GAIN Report - Oilseeds, Cotton, Sugar, Grain and Feed

Area and Production Lower

The estimate of 2012/13 (Aug/Jul) cotton production has been reduced to 32.5 million 170 kg bales (5.5 million metric tons /25.3 480 lb bales) and harvested area has been revised to 11.6 million hectares due to damage caused by tropical storm Nilam in the state of Andhra Pradesh, India’s third-largest cotton producing state.

In the first week of November, tropical cyclone ‘Nilam’ struck the southeastern states of Andhra Pradesh and Tamil Nadu. The southern coastal region of Andhra Pradesh received heavy rains and severe flooding. The cotton growing regions of Warangal and Guntur received excess rainfall and winds during the storm. Preliminary official estimates indicate that 238,000 hectares of cotton were damaged. The cyclone struck in the midst of the cotton picking season. Quality has been affected by high moisture content and yields are expected lower due to higher boll droppings due to strong winds. The Cotton Corporation of India (CCI) recently made small commercial purchases in Andhra Pradesh, but rejected some cotton because of quality concerns and high moisture content. Until the full crop damage assessment is completed, CCI may refrain from procuring lower quality or storm-affected cotton. CCI typically procures cotton with a moisture content of eight percent or less.

Weather conditions during October and November were generally good for the crop in the states of Gujarat and Maharashtra, India’s largest and second largest cotton producing states respectively. Sunny, warm weather promoted cotton harvesting in India. Cotton arrivals continue to lag well behind the 2010/11 and 2011/12 pace. According to CCI, arrivals had reached just 2.3 million 170 kg bales (1.8 million 480 lb bales/ 391,000 metric tons) as of November 18 compared to 3.2 million 170kg bales (2.5 million 480 lb bales/ 544,000 metric tons) a year ago. Trade sources indicate that an additional 700,000 170 kg bales (547,000 480 lb bales/ 119,000 metric tons) have arrived over the past week, bringing the total to 3 million 170 kg bales (2.3 million 480 lb bales/ 510,000 metric tons), still well below the year-ago pace for the same period. Farm prices are Rs. 42 per kg (38 cents per pound), unchanged from a month ago and only slightly lower than a year ago. Nevertheless, farmers appear to be dissatisfied with market prices and may be holding onto cotton. As the local marketing year was coming to a close in September, a number of large textile mills had secured their cotton needs through December. Increased purchases from those mills could stimulate additional arrivals next month.

Consumption

Monthly cotton consumption was 2.1 million 170 kg (357,000 metric tons/1.63 million 480 lb bales) bales in September, the tenth consecutive month that consumption exceeded 2.0 million bales. Domestic yarn prices have dropped 10 percent since September and spinning margins are down 10 to 20 percent to 80 cents per kg for the representative 40s count yarn (See Table 6), the lowest level since May. With the aid of a weak rupee, spinners have registered large volumes of yarn for exports over the past six months (mainly to China) (See Table 4). However, sales to China have reportedly been aggressively priced and spinners indicate that demand from the domestic industry has been weak. Spinners have also expressed concern that textile demand in the United States and Europe could be sluggish following the holiday season.

Mills in southern India, where 40 percent of India’s cotton is consumed, continue to express concerns about the power supply and some are still feeling the effects of 2010/11 losses. Some are limiting their cotton purchases to their short-term needs in an effort conserve capital. Southern mills are also concerned about the lower output and quality of cotton in nearby Andhra Pradesh which could lead to more costly cotton sourcing from central India.

FAS Mumbai continues to estimate the 2012/13 cotton consumption at 21.0 million 480 lb bales (4.48 million metric tons/26.4 million 170 kg bales). The Cotton Advisory Board (CAB) revised the annual loss estimates for the MY 2010/11 and 2011/12 and the same has been reflected in Table 1.

Monthly Cotton Consumption by the Textile Sector
(Million 170 kg bales)

Source: Textile Commissioner
*Loss estimate from the Cotton Advisory Board

Trade Estimates

Official final data indicate that 2011/12 cotton exports were 14.1 million 170 kg bales (11.1 million 480 lb bales/2.4 million metric tons), 600,000 480 lb bales higher than the current USDA Washington estimate.

Exports from August through November were 635,000 480 lb bales (813,000 170 kg/138,000 metric tons). The Government of India recently announced that export registrations through the end of November had reached 450,000 170 kg bales and it did not plan to impose additional restrictions on exports (IN2136). Preliminary trade estimates suggest that exports during October and November were even higher at nearly 700,000 170 kg bales (See Table 2b). Indian cotton ex-gin is trading at par with the Cotlook A Index and exporters indicate that they can move cotton to an FOB position at competitive rates. China, Bangladesh. Pakistan and Vietnam are currently purchasing Indian cotton. Trade sources indicate that exports during December may be higher than November and, while international market conditions and demand are uncertain, the monthly pace of exports is expected to increase over the next few months as more cotton enters the market and the rupee continues to trade at low levels against the dollar. Exports are now expected to reach 4.5 million 480 lb bales. Official final data suggest that 2011/12 imports were 500,000 170 kg bales (400,000 480 lb bales/85,000 metric tons), 200,000 480 bales below the current USDA Washington estimate.

1\ Official total reflects estimates from the Directorate General of Foreign Trade, for Harmonized Tariff Schedule code 5201 – raw cotton.

Estimate of 2012/13 Cotton Exports

1\ Official sub-total reflects estimates from the Directorate General of Foreign Trade, for Harmonized Tariff Schedule code 5201 – raw cotton.
2\ Preliminary official data from the Directorate of Commercial Intelligence and Statistics. These data are subject to revision, but are considered a fairly reliable predictor of final official data.
3\ FAS Mumbai estimate

1\ Official total reflects estimates from the Directorate General of Foreign Trade, for Harmonized Tariff Schedule code 5201 – raw cotton.

Estimate of 2012/13 Cotton Imports

1\ Official sub-total reflects estimates from the Directorate General of Foreign Trade, for Harmonized Tariff Schedule code 5201 – raw cotton.
2\ Preliminary official data from the Directorate of Commercial Intelligence and Statistics. These data are subject to revision, but are considered a fairly reliable predictor of final official data.
3\ FAS Mumbai estimate

December 2012

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