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Acute shortage of extra fine cotton likely in current season

The global demand supply position for extra fine cotton is expected to be far more tighter this season as compared to that of other varieties, according to latest reports.

It was generally known uptill now that the overall availability of cotton this season might be tighter as compared to that in 2002-03. Though the global production of cotton is although expected to rise to 20.23 million tonnes from 1926 million tonnes in the previous season, the world cotton consumption is expected to exceed the improved crop and reach 21.21 million tonnes from 20.86 million tonnes in the earlier season.

Extra fine cotton is, however, not likely to share the overall increase in production. On the contrary, according to the latest indications by ICAC, the crop is likely to be smaller by 16 per cent at 5.91 lakh tonnes as compared to 7.01 lakh tonnes in the preceding season.

This is because of the anticipated sharp fall in the production of extra fine cotton not only in Egypt, but also Tajikistan, Turkmenistan, USA and Australia. Of course, the production of extra fine cotton is expected to be higher this season in China, Sudan and India, but they together will not be able to make up for the expected decline in production in other areas.

It might be interesting to note that the total production of extra fine cotton in the world had reached a peak of 7.56 lakh tonnes in 2001-02, but it came down to 7.01 lakh tonnes in the subsequent year and is now expect to fall further to 5.91 lakh tonnes.

According to latest indications, Egyptian extra fine cotton production is expected to drop 26 per cent to 2.13 lakh tonnes from 2.88 lakh tonnes, while the US Pima production is expected to fall precipitately by 49 per cent from 1.48 lakh tonnes to just 76,000 tonnes. Extra fine cotton production in China is expected to be higher by 35,000 tonnes at 90,000 tonnes and also in Sudan by 20,000 tonnes at 70,000 tonnes. But production in Central Asia is expected to go down by 25,000 tonnes.

On the other hand, the world consumption of extra fine cotton is expected to rise by nearly six per cent to 4.14 lakh tonnes from 3.91 lakh tonnes in the earlier season.

In recent years, consumption of extra fine cotton reached the peak of 4.24 lakh tonnes in 1997-98. In the subsequent years, it steadily came down, touching the low of 3.61 lakh tonnes in 2001-02. This season, however, the trend is expected to be reversed and total consumption of extra fine cotton is expected to reach 3.91 lakh tonnes, according to the recent estimates.

In view of the overall decline in extra fine cotton production, its export shipments from Egypt, USA, etc may take a beating.

Several cotton textile mills which are accustomed to using imported extra fine cotton may have to do with less of it and may also have to pay higher prices for whatever they may get. The intensity of price rise in the case of extra fine cotton may be much more than in the case of other varieties. Yet another factor which may influence prices is that the current season has begun with lower opening stock of extra fine cotton at 3.54 lakh tonnes as compared to 3.93 lakh tonnes.

Main consumers of extra fine cotton are Egypt, India, China and USA. Elsewhere, its consumption is not very significant. So far as India is concerned, its consumption of extra fine cotton in the current season is forecast at 1.30 lakh tonnes as compared to 1.28 lakh tonnes in the previous season. In 2001-02, India consumed 1.25 lakh tonnes of such cotton.

It might be interesting to note that the overall closing stock of all varieties of cotton this season is expected to fall 7.80 million tonnes, from 8.79 million tonnes at the end of 2002-03 and 10.62 million tonnes at the end of 2001-02. This season’s closing stock will be the lowest in recent years. This factor is already having its impact on cotton prices all over the world.

The overall production of cotton in India this season is expected (by ICAC) to be around 2.68 million tonnes as against 2.31 million tonnes in the preceding season. On the other hand, the overall consumption of cotton in India is likely to rise this season to 2.91 million tonnes from 2.88 million tonnes in the earlier season. So far as extra fine cotton is concerned, India’s production is estimated at 80,000 tonnes this season as against 65,000 tonnes in the earlier season. This will, however, be far lower than the requirement which is estimated to rise to 1.30 lakh tonnes from 1.28 lakh tonnes in the earlier season.

Private estimates of overall cotton production in India vary widely leading to erratic price fluctuation. It is possible that cotton prices in India may remain somewhat subdued initially for some time when arrivals are brisk, but eventually they may fall in line with the world trend. Prices in India cannot remain low for long as this may encourage export enquiries which might lift up prices to the prevailing international levels as are there are no restrictions on exports of cotton from the country. The current season is to end with an opening stock of 24 lakh bales. If the currents season is to end with the closing stock of 24 lakh bales, the domestic corp should exceed 170 lakh bales, taking into account some possible increase in domestic cotton consumption this season. This temporary setback, if any, at the start of the season may not least last long.

— M D Dewani