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


09 August 2013

USDA GAIN: India Cotton and Products Update July 2013USDA GAIN: India Cotton and Products Update July 2013

According to official reports, planted area under cotton has reached an estimated 10.5 million hectares, well ahead of the average coverage for this time of year. 2013/14 production is forecast at 27.5 million 480 lb bales, down slightly from USDA Washington’s latest forecast. Monsoon rains have been timely and well distributed, but excessive cloud cover and heavy rains may affect yields in some areas. 2012/13 exports climbed to 7.6 million 480 lb bales based on preliminary trade data, exceeding previous USDA estimates. The Cotton Corporation of India has sold nearly 50 percent of its stocks and higher volumes of cotton imports are expected over the next few months.
USDA GAIN Report - Oilseeds, Cotton, Sugar, Grain and Feed

Cotton Planting and Production

Major cotton-growing regions have received normal or above-normal rainfall, which has advanced cotton planting. According to official data, cotton sowing area has reached an estimated 10.5 million hectares, eight percent higher than last year and almost 12 percent higher compared to the average normal sowing area as of July 26, 2013. Planted area in Gujarat, a major cotton producing state from which a sizeable portion of India’s exports are sourced, has reached 2.6 million hectares which has already surpassed the government’s initial forecast of 2.5 million hectares. Planted area in Maharashtra and Andhra Pradesh has reached 3.73 million hectares and 1.75 million hectares respectively. The cotton acreage in the north zone comprising the states of Punjab, Haryana and Rajasthan has reached a combined total of 1.35 million hectares where sowing has been completed. Cotton acreage in Madhya Pradesh has reached 600,000 hectares. According to trade sources, pest infestation has not been an issue, but sucking insects tend to affect plants later in the season. FAS Mumbai forecasts production for MY 2013/14 to 35.2 million 170 kg bales (27.5 million 480 lb bales / 5.95 mmt).

Rains have been heavy in some areas and cloud cover has been extensive across portions of central India. Early estimates indicate that15,000 – 20,000 hectares of cotton area may have been damaged due to heavy rains in Maharashtra and Andhra Pradesh. Flooding and water logging could affect yields in some areas. The current production forecast is based on the assumption that monsoon performance will be normal over the next few weeks which suggests that conditions will be drier and sunnier. Government agencies have issued advisories for farmers to provide adequate drainage in low lying areas and manage weed growth.

Arrivals

On July 14, 2013, cotton arrivals had reached 33.11 million 170 kg bales (25.25 million 480 lb bales / 5.63 mmt) compared to 33.61 million 170 kg bales (26.24 million 480 lb bales / 5.71 mmt) last year. The pace of daily cotton arrivals is 20,000 170 kg bales per day. The Cotton Corporation of India continues to auction stocks on a daily basis and will continue to release stocks during the next marketing year, provided there are enough buyers in the market. Total sales have reached 1.2 million 170 kg bales (937,000 480 lb bales / 204,000 mt) leaving 1.1 million 170 kg bales (859,000 million 480 lb bales / 187,000 mt) with the Cotton Corporation of India. FAS Mumbai continues to forecast MY 2012/13 production at 34 million 170 kg bales (26.5 million 480 lb bales / 5.78 mmt). Seed cotton prices continue to trade near 40 cents/lb (see Figure 1b) as supplies remain tight toward the end of the marketing year.

Consumption

Consumption remains robust on account of strong demand for cotton yarn from China and Bangladesh. Trade sources indicate that demand for yarn from local buyers and exporters is expected to stay firm in coming weeks. There has been a steady demand from yarn manufacturers as exporters look to take advantage of the weaker rupee. The rupee has devalued by 35 percent over the past two years and dropped from Rs. 54 per dollar to Rs. 60 per dollar over the past few weeks. Yarn export registrations for June have risen by more than 85 percent on a month-to-month basis and by 73 percent on a year-to-year basis.

MY 2012/13 consumption figure has been forecast at 28.81 million 170 kg bales (22.5 million 480 lb bales / 4.89 mmt). The total consumption has been averaging over 2 million 170 kg bales (1.56 million 480 lb bales / 340,000 mt) per month since December 2011. Mills in the south have increased their procurement of cotton as demand for cotton yarn increases in export markets. Trade sources indicate that domestic consumption will remain strong as small to medium sized mills seek to cover their position till September. But volatility in cotton prices and working capital constraints are limiting the mills from covering their positions in the long-term. Larger mills are facing fewer liquidity issues and are largely covered with either imports or domestic supplies through October when new-crop cotton arrives.

Trade

Preliminary data suggests that exports reached 9.8 million 170 kg bales (7.63 million 480 lb bales / 1.66 mmt) through the end of July, the final month of the 2012/13 marketing year. More than 60 percent of import shipments in July originated from West Africa suggesting that, as predicted, mills are covering their needs with imports. Imports are expected to continue over the next few months. Preliminary data suggests that overall imports have reached 1.47 million 170 kg bales (1.15 million 480 lb bales / 251,000 mt).

August 2013

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