Mills likely to consume more cotton

At a meeting on Tuesday, the Cotton Advisory Board (CAB) said textile mills were likely to consume more cotton than estimated earlier this year. Mills’ consumption estimate for the current cotton year (October to September) has been revised marginally upwards from 21 million bales to 21.6 million bales (1 bale equals 170 kg).

CAB said mills had reported a renewed demand for cotton. Analysts see this as a signal for revival of the cotton textile industry.

The consumption estimates for small-scale units have also been revised upwards from two million bales to 2.4 million bales. Together, small and big mills are likely to exceed the earlier consumption estimate by one million bales. This is despite the total crop forecast being revised downwards by 1.1 million bales.
 

BETTER TIMES
	2010 - 11	2011 - 12
Supply
Opening stock	4.05*

4.83 Crop33.9034.50 Imports0.500.60 Total supply38.4539.93 Demand Mill consumption22.0721.60 Small-scale units2.472.40 Non-mill consumption2.202.00 Exports6.888.40 Total demand33.6234.40 Closing Stock4.835.53 All figures in million bales and are based on provisional estimates 
* Opening stock for 2010-11 is based on the verified figure

The rise in consumption, at a time when the total output is expected to decline, signals that cotton prices would remain firm, especially because even exports are pegged higher this year. The estimate for export has also been raised to 8.4 million bales, from eight million bales earlier.

“China, a major exporter of textiles, has turned costlier for importers, since the cost of production has risen in that country. India, therefore, stands to gain, especially because it has been able to offer competitive prices to importers due to weakening of its currency,” said Technopak Advisors chairman, Arvind Singhal.

“In future, too, the demand on the domestic market is expected to pick up, which is a positive sign for the industry,” Singhal added.

Domestic consumption of raw cotton has considerably increased on the back of good export demand for yarn from China, Sri Lanka, Bangladesh, Vietnam and Egypt, coupled with strong domestic demand.

“Demand for cotton yarn is expected to be stronger after March. Also, demand from the apparel sector has picked up, both in domestic and international markets,” said D K Nair, secretary-general, Confederation of Indian Textile Industry.

“Even as demand from the euro zone, one of India’s largest export destinations, remains subdued due to the sovereign debt crisis there, demand from the US has risen considerably,” Nair added.

Last year (2010-11), the country’s total cotton production was 32.5 million bales, the highest ever. But, due to crop damage in Andhra Pradesh and Maharashtra, the CAB this year revised production estimates downwards to 34.5 million bales from the 35.6 million bales earlier.

However, despite the reduction, the total production this year is estimated to exceed last year’s output. Therefore, it will remain the highest quantity the country has ever produced.