Cotton ending stocks may be lower than estimates as offtake rises

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India’s cotton ending stocks could be lower than 75 lakh bales (170 kg each) in the current season to September as domestic demand has picked up. But some estimates are pegging them higher than 100 lakh bales against a record 120-plus lakh bales last season.

“Cotton closing stocks could be 70-80 lakh bales but they will not definitely be as high as last year,” said Cotton Corporation of India (CCI) Chairman-cum-Managing director Pradeep Kumar Agarwal.

Cotton output for 2020-21 revised downwards to 356 lakh bales

“Cotton consumption seems to be increasing. However, we go by the figures put out by the Committee on Cotton Production and Consumption (CCPC) in the last meeting,” he said.

CCI’s carryover

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

Some trade experts expect mills’ consumption to top 300 lakh bales, though Southern India Mills Association (SIMA) Secretary-General K Selvaraju said the shutdown due to Covid pandemic could lower the offtake below CCPC projections.

In its January 25 meeting, the CCPC estimated domestic consumption at 330 lakh bales, with mills’ offtake at 286 lakh bales. “Spinning mills’ consumption could be lower than 270 lakh bales as the shutdown has affected operations,” the SIMA official said.

Cotton exports top last season’s shipments

The Cotton Association of India (CAI), the apex body of cotton traders, pegged domestic consumption at 325 lakh bales at its meeting last month, with mills’ demand pegged at 282 lakh bales.

Lower arrivals

“I see domestic consumption at 360 lakh bales, though, initially, we thought it could be 350 lakh bales due to Coronavirus. We are not seeing any rise in arrivals of stocks. Where have these stocks gone if they have not been exported? The only conclusion is that consumption has increased,” said Rajkot-based Anand Poppat, a raw cotton, yarn and cotton waste trader.

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

The CCPC had projected ending stocks at 97.95 lakh bales, while the CAI pegged it at 94 lakh bales.

The projections are based on their production estimates for the current season. The CCPC pegged the output this season at 371 lakh bales, and the CAI at 356 lakh bales. Poppat estimates cotton production at 360 lakh bales. (See table for last season’s comparative figures)

 

Export demand

The other reason for lower ending stocks this season is export demand. “Currently, 67 lakh bales of cotton have been exported. I expect exports to be higher than 72 lakh bales,” said Rajkot-based Poppat.

CCI head Agarwal said cotton exports would exceed 70 lakh bales and the current shipments were competitive globally.

“Our best quality cotton is currently quoting at ₹53,000 a candy (356 kg). But we are also providing fair average quality cotton to Bangladesh at ₹46,000-49,000,” said Poppat.

“In the last few months, Indian cotton has bridged the gap with the prices of global cotton. Earlier, due to Coronavirus, our cotton was priced lower,” said Agarwal.

Poppat said Indian cotton, mainly Shankar-6 — the benchmark for exports, is quoted at US cents 90-97 a pound (₹53,000-57,200 a candy) cost and freight, compared with 88.07 cents (₹51,900) at the Intercontinental Exchange (ICE), New York, which is free-on-board rate.

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

Both, however, do not expect much of an impact from the reports of lower sowing till July 9. They expect the planting to pick up momentum soon

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source https://earn8online.com/index.php/307601/cotton-ending-stocks-may-be-lower-than-estimates-as-offtake-rises/