Indian cotton trading activity has slowed down since the end of July. Buyers are losing interest in CCI cotton sales too, which till last month was in high demand.
The industry is looking forward to arrival of new cotton crop. Now new crop is progressing well; sowing is almost at par as previous year. Some cotton growing areas have reported deficient rains. Saurashtra in Gujarat reported around 38% shortfall in rain. It is predicted that rain deficit will come down in the next 10-15 days. If this in fact happens, then crop numbers can be better than previous years.
Nominal cotton arrivals have begun in the north, which is expected to pick up fromthe first week of September, again depending on the monsoon situation in the region.September rains in the north can damagecotton and also impact quality in terms of grade and other parameters.
Monsoon rains across India in the previous week was below average for the second straight week, the weather department has raised concerns over production of summer-sown crops including cotton.
CCI has limited stocks now. Mills are reportedly covered for the next 60-90 days on average. Mills have done well this year in terms of yarn production and profits, and cotton demand therefore is expected to remain strong.
The new season is just 45 days away.Traders/ stockists are trying to liquidate their stocks of cotton, but buyers are not willing to buy at current prices. Thus, the spike in ICE failed to impact Indian cotton prices.
CAI’s latest estimates
The Cotton Association of India (CAI), in its July estimate of the cotton crop for the season 2020-21 has reduced the crop estimate by 150,000 bales (of 170 kg each) to 35.45 million bales from its previous estimate of 35.6 million bales.
The CAI maintained its cotton crop estimate for the Northern Zone at the same level as in its previous month’s estimate i.e. at 6.55 million bales. The cotton crop estimate for the Central Zone has been reduced by 50,000 bales to 19.35 million bales.
There is a reduction of 250,000 bales in the crop estimate for Gujarat state, while the crop estimates of Maharashtra and Madhya Pradesh have been increased by 150,000 bales and 50,000 bales respectively compared to the estimates of these states made in the previous month.
The cotton crop estimate for Southern Zone has been reduced by 100,000 bales to 9.05 million bales. The cotton crop for Telangana is estimated lower by 100,000 bales, whereas the estimates for the states of Andhra Pradesh, Karnataka and Tamil Nadu have been maintained at the same levels as estimated previously. Also, there is no change in the cotton crop estimate for Orissa.
The total cotton supply estimated by the CAI during the period from October 2020 to July 2021 is 48.26 million bales. This consists of the arrivals of 34.861 million bales upto July 31, 2021, imports of 900,000 bales upto July 31, 2021, and the opening stock at the beginning of the season on October 1, 2020 of 12.5 million bales.
Further, the CAI has estimated cotton consumption during the months of October 2020 to July 2021 at 27.5 million bales, while the export shipment of cotton upto July 31, 2021 is estimated at 7 million bales.
Stock at the end of July 2021 is estimated at 13.761 million bales, including 8 million bales with textile mills, and the remaining 5.76 million bales with Cotton Corporation of India (CCI), Maharashtra Federation and others.
August 2021 WASDE cotton
In this month’s 2021/22 US cotton projections, beginning stocks are slightly larger, and a 536,000-bale decrease in production results in lower exports and ending stocks. Beginning stocks are larger as estimated exports for 2020/21 are reduced 50,000 bales based on final Export Sales data and Census Bureau data through June. National Agricultural Statistics Service’s (NASS) first survey-based estimate of production for 2021/22 is 17.3 million bales.
Exports are 200,000 bales lower than in July, and ending stocks are 300,000 bales lower, equating to 17% of expected use, the same as in 2020/21. The US season-average price for upland cotton is forecast 5 cents per pound higher than in July which, at 80 cents, would be its highest since 2011/12. Lower production is reducing this month’s 2021/22 global ending stocks forecast slightly. World production is forecast 546,000 bales lower as reduced production in Brazil, the United States, and Uzbekistan offsets higher projections for Australia, Mali, and Tanzania. Consumption is forecast slightly higher, up 170,000 bales, with gains for Bangladesh and Pakistan.
World 2021/22 cotton ending stocks are projected at 87.2 million bales, about 500,000 bales lower than in July, and 4.6 million lower than in 2020/21.
The USDA expects upland cotton production to be up on the year, while should be well below year ago levels. That follows year to year changes in planted area and these numbers will depend on average weather conditions through late development into harvest.
The USDA raised the US old crop cotton ending stocks guess, while cutting the outlook for new crop, while old and new crop rice carryout projections were both down on the month.
US cotton export sales for week ending August5, 2021
Net sales for 2021/2022, which began August 1, totaled 342,700 RB. Increases primarily for China (123,800 RB), Turkey (72,500 RB), Bangladesh (39,400 RB, including decreases of 200 RB), Pakistan (39,100 RB, including decreases of 700 RB), and Vietnam (30,500 RB, including 300 RB switched from Japan and decreases of 2,300 RB), were offset by reductions for Taiwan (200 RB).
For 2022/2023, net sales of 15,300 MT were reported for Mexico (6,500 RB), Turkey (4,400 RB), and South Korea (4,400 RB). A total of 1,310,900 RB in sales were carried over from the 2020/2021 marketing year, which ended July 31.
Exports for the period ending July 31 of 49,100 RB brought accumulated exports to 14,882,100 RB, up 5% from the prior years’ total of 14,174,500 RB. The destinations were primarily Mexico (10,900 RB), Pakistan (8,000 RB), Turkey (6,700 RB), Vietnam (6,400 RB), and Indonesia (5,900 RB). Exports for August 1-5 totaled 190,600 RB, with Pakistan (38,900 RB), Vietnam (36,500 RB), China (30,100 RB), Turkey (23,700 RB), and Mexico (14,000 RB) being the primary destinations.
(Vimal Verma is a cotton trader)