Cotton ending shares could also be decrease than estimates as offtake rises

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India’s final cotton stocks could be below 75 lakh bales (170 kg each) by September this season as domestic demand has picked up. But some estimates put them higher than 100 lakh bales, up from a record of over 120 lakh bales last season.

“Closing cotton inventory could be 70-80 lakh bales, but it will definitely not be as high as last year,” said Pradeep Kumar Agarwal, chairman and managing director of the Cotton Corporation of India (CCI).

Cotton production for 2020-21 revised down to 356 lakh bales

“Cotton consumption seems to be increasing. However, we are going to use the figures published by the Cotton Production and Consumption Committee (CCPC) at the last meeting, ”he said.

Transfer of the CCI

CCI, which had nearly 207 lakh bales of cotton, could be left with 18 lakh bales by the end of the season, the CMD said, adding that most of its sales were for domestic consumption.

Some trade experts expect mill consumption to exceed 300 lakh bales, although Southern India Mills Association (SIMA) general secretary K Selvaraju said the shutdown due to the Covid pandemic could lower the decrease below CCPC projections .

At its January 25 meeting, the CCPC estimated domestic consumption at 330 lakh bales and the mill decrease at 286 lakh bales. “The mill consumption could be less than 270 lakh bales as the shutdown has affected operations,” said the SIMA official.

Cotton exports lead last season’s shipments

The Cotton Association of India (CAI), the umbrella organization of cotton traders, at its meeting last month set domestic consumption at 325 lakh bales and factory demand at 282 lakh bales.

Less arrivals

“I see the domestic consumption at 360 lakh bales, although we originally thought that it could be 350 lakh bales due to the coronavirus. We don’t see any increase in stock additions. Where did these stocks go if they weren’t exported? The only conclusion is that consumption has increased, ”said Anand Poppat from Rajkot, a trader in raw cotton, yarn and cotton waste.

It is reasonable to forecast domestic consumption at 355 lakh bales, he said, adding that he expects ending stocks to be around 58 lakh bales.

The CCPC had forecast the final inventory at 97.95 lakh bales, while the CAI set it at 94 lakh bales.

The forecasts are based on their production estimates for the current season. The CCPC has set the performance at 371 lakh bales and the CAI at 356 lakh bales this season. Poppat estimates cotton production at 360 lakh bales. (See table for comparative figures from last season)

Export demand

The other reason for lower closing stocks this season is export demand. “At present, 67 lakh bales of cotton have been exported. I expect exports to be over 72 lakh bales, ”said Poppat from Rajkot.

CCI chief Agarwal said cotton exports exceeded 70 lakh bales and current shipments were globally competitive.

“Our best cotton quality currently costs 53,000 yen per candy (356 kg). But we also supply average quality cotton to Bangladesh for 46,000 to 49,000 yen, ”said Poppat.

“In the past few months, Indian cotton has closed the gap to global cotton prices. Our cotton used to be cheaper because of the coronavirus, ”said Agarwal.

Poppat said Indian cotton, primarily Shankar-6 – the benchmark for exports, is quoted at 90-97 US cents per pound (53,000-57,200 yen per candy) in cost and freight, compared to 88.07 cents (51,900 yen) at the Intercontinental Exchange (ICE), New York, at a free on-board tariff.

Bangladesh is the biggest buyer of Indian cotton, with Vietnam and China being the other big buyers, Agarwal and Poppat said.

Neither of them, however, expect much of an impact from reports of lower seeding through July 9th. They expect the sowing to gain momentum soon