Month: October 2015
Infinite patience, infinite purity and infinite perseverance are the secret of success in a good cause.
INDIA Arrivals: (as on date: 15-10-2015)
|State wise Arrivals||2014-15
INDIA Weather and Sowing:
According to the Indian Meteorological Department (IMD), rainfall during the southwest monsoon (June – September) was 14 % below the long period average. This resulted in poor plant growth prompting industry production estimates to move downwards.
Sowing: (as on date 15.10.2015)
|State wise Sowing||2014-15
During recent field travel to Gujarat, Central Maharashtra and parts of Karnataka/Telangana, plants exhibited signs of moisture stress, wilting and stunted growth. Moreover, there was large variability in cotton plant development. Stunted growth should lead to a lower number of boll formations and reduced yields according to the USDA.
Domestic Market Summary:
Cotton crop in North Indian states of Punjab & Haryana may dip by 40% on white fly pest attack.Trade circles expect Punjab crop to fall from 1.4 million bales (2014-15) to 0.7 million bales (2015-16) and Haryana crop to fall from 2.5 million bales to 1.5 million bales. Damage from the whitefly attack on the Bt cotton variety in the states of Punjab and Haryana is likely to be extensive and has even been blamed for farmer suicides. The two Indian states are suffering from the first major pest infestation since India adopted genetically modified cotton in 2002, raising concerns over the vulnerability of the GM seeds. With pesticides running out of steam and pests developing resistance, alternatives would have to be quickly found.
New cotton has started to arrive in Gujarat, Maharashtra, Punjab and South-Indian states. An estimated 70,000 bales (one bale is 170 kg) arrive every day. Traders expect the supply to reach its peak by end-October. There is a good demand from North Indian mills while exporters and mills from South India are buying very small quantities. Season’s peak supply is expected from December onwards. Traders believe price will not decrease much from the current level as it is already very close to MSP.
CAI has released its second estimate for the cotton season 2015-16. It lowered its estimate and placed it at 37.70 million bales. The projected balance sheet drawn by the CAI estimated total cotton supply for the new season at 46.76 million bales, while the domestic consumption is estimated at 32.50 million bales, thus leaving a surplus of 14.26 million bales.
However, the trading community feels the cotton production will not be more than 35 million bales and total supply including carry forward will be about 40.04 million bales. Traders estimated about 4 million bales opening stock, while according to CAI estimate, the opening stock in new season will be 7.86 million bales.
COTTON ESTIMATE FOR 15-16 ACCORDING TO:
- Ministry of Agriculture: 33.5 million Bales
- CCI, B. K. Mishra (CMD): 35 million Bales
- CAI: 37.7 million Bales
- USDA: 36.5 million Bales
- Trade circles: 32.5 to 35 million bales
Cotton Corporation of India (CCI)
Cotton Corporation of India has reported commencement of new season purchases in the Southern state of Telangana. The government has fixed the minimum support price (MSP) for cotton at Rs 3,936-4,100 per quintal, depending on the moisture content.CCI continues to hold almost 0.9 million bales (170 kg bales) from its 2014/15 procurement.
The government has fixed the minimum support price (MSP) for cotton at Rs 3,936-4,100 per quintal, depending on the moisture content. The payments to farmers would be made through online. In response to the demand of some farmers from Telangana that the MSP be raised to Rs 5,000 per quintal, textiles minister Santosh Kumar Gangwar said his ministry has already urged the Ministry of Finance for upward revision.
Contrary to general belief that yarn export is very slow, Spun yarn exports maintained its growth tempo in August 2015.The tempo seems to have slowed down since then. Export of Indian spun yarns has increased in volume, although value is down compared to last year.
All of a sudden the decision (on 12th Aug 2015) by Chinese Govt. to devalue its currency RMB by 4% created a sudden panic which added fuel to the sluggish demand and falling yarn prices. This resulted in a lot of unhealthy practices of renegotiation of orders, contract defaults and market crashed by over 10% immediately after this devaluation of RMB.
On other hand the European economy was also struggling due to USD gaining strength against Euro. The retailers in return started reducing orders and asking for discounts on garments. The Indian Industry was not prepared for such sudden changes in global scenario.
A large number of Indian spinners were participating and visiting during the recent yarn exhibition at Shanghai from 13th to 15th Oct. Most of the Chinese buyers used this opportunity to negotiate yarn at lower prices and offset losses which they had suffered due to high prices of yarns in past imports.
COTTONGURUTM Sample Bank
For Registration click here: http://www.cottonguru.org/testing.php
COTTONGURUTM has been running a special package for buyers to know the complete details of the supplier (verified postal address, contact details with mobile and landline numbers, details of proprietor/partner/director, ginning and credit capacity, list of buyers, etc).This also includes a “MADE TO ORDER” sourcing plan for cotton.
Similarly, there is a special package for ginners to understand the buyer (address, contact details, credit rating, credit verification, list of suppliers, etc).This also includes branding and locating suitable buyer as per ginner’s quality and credit facility.
* Bangladesh to set up Textile Park in Gujarat, India
* Polyester spun prices have rebounded in September in Pakistan, offering larger margins to spinners, whereas Indian competitors were experiencing a rather opposite situation
* Spandex prices have been stabilized in China, mostly due to a reduction of operating rates amid low demand level and very high inventories.
Pakistan: Pakistan has imposed 10% additional duty on yarn imported from India. Duty on yarn is now 15% import from anywhere and ERF 3.5% and LTF on Spinning and Ginning 5% from 1st November.
Last weekend, the seed cotton price shot to this season’s high of Rs 5,500/maund in local markets as suppliers, fearing a massive production fall this year, held up the supply of cotton. The short supply forced buyers into panic buying at higher prices.
Pakistan Cotton Ginners Association has estimated current season’s production at 12 million bales as compared to 14.87 million bales last year, foreseeing a decline of nearly 20 % on yearly basis. The Pak Government has projected cotton production at 13.3 million bales (of 170 kilogram each).
Besides a massive attack by white fly, rainfalls and floods have ruined hundreds of thousands of bales in different parts of the country, he added.
Vietnam: Doan Duy Khuong, Vice-Chairman, Vietnam Chamber of Commerce and Industry (VCCI) said that India had had great opportunities to provide raw materials to Vietnam’s textile industry.
Vietnam needs more than 500,000 tons of cotton per year to meet the rising demand. He added that India had enough supply of the material for the Vietnamese textile industry.
India and Vietnam’s bilateral trade ties have grown significantly, with a total trade turnover of $5.59 billion in last year, increasing by 9.84 % compared to 2013.
China: Website CN Cotton reports that
* China imported just 50,900 tons of cotton in September, a decline of 59% year-on-year. This is the lowest monthly import since records began in 2005, and the second month of record low imports in a row.
* Chinese imports for the first nine months of the year fell 42% to 1.16m tonnes.
* Chinese cotton demand has been hit by a range of factors, including massive domestic stocks, a weaker industrial sector, and competition from synthetic fibres, which have become cheaper as a result of low petrochemical prices.
* Chinese inventories accumulated as result of government price support policies, which encouraged rising domestic production, while mills favored cheaper imported cotton.
* The USDA sees Chinese cotton imports falling to a 13-year low over the 2015-16 season.
* State cotton inventories are estimated at 11m tons, and a recent round of auctions had no success in attracting buying interest
* The lack of buying was tied to the high prices demanded at auction, as a result of government reluctance to flood markets with cheap cotton, threatening prices for farmers.
* China may be forced to lower the price to deplete the huge cotton reserve.
* Reinhart has reported that China was seeing a shortage in good quality cotton.
But there may be some good news for Chinese industry, as the government recently announced that it would expand a tranche of so-called “Chinese quantitative easing,” by allowing lenders to use loans from local governments as collateral in order to borrow cheaply from the central government, targeting the funds at small and agricultural businesses.
Such a move could be beneficial for mills and garment factories.
Global Cotton Stocks to Decline in 2015/16:-
The latest U.S. Department of Agriculture (USDA) cotton projections for 2015/16 indicate that world cotton stocks are expected to decrease 4 % from last season’s record to 107 million bales. The global stock decline would be the first in 6 years; the recent dramatic stock buildup resulted from policies in China that supported domestic cotton prices above world prices.
With new policies in place to limit raw cotton imports in 2015/16, stocks in China are forecast to decrease 4 %—the first reduction there in 5 seasons. However, China’s stocks remain at an extremely high 65.3 million bales, or nearly 2 years’ worth of cotton mill use. Meanwhile, stocks outside of China have seen relatively modest changes. As recently as 2010/11, India was the single largest stockholder, with 11.5 million bales. In 2015/16, stocks in India are projected to rise slightly to 13.5 million bales, or about 13 % of global stocks, compared with China’s share of 61 percent. U.S. stocks contribute 3 % of the total, while stocks in the rest of the world account for 23 %.
Stable World Cotton Trade Expected in 2015/16
World cotton imports are projected to remain unchanged at 7.6 million tons in 2015/16. While China is likely to remain the world’s largest importer in 2015/16, its imports are forecast to fall by 12% to 1.6 million tons. This represents 30% of its peak volume of imports in 2011/12. In 2015, the Chinese government restricted imports to the minimum volume required by the World Trade Organization to encourage mills to purchase domestic cotton. In July and August 2015, it sold nearly 60,000 tons from its reserve, but still holds 11 million tons. Given the large volume of production and reserves, imports are likely to be restricted again in 2016. Meanwhile, imports by other countries are expected to grow 4% to 5.8 million tons. Imports in Bangladesh, Vietnam, and Indonesia, the next three largest importing countries, are all projected to grow in 2015/16. Bangladesh imports are forecast to increase 1% to 972,000 tons while Vietnam’s imports are forecast up 2% to 956,000 tons. After decreasing in 2013/14, Indonesia’s imports recovered 13% to 735,000 tons in 2014/15, and are expected to increase 6% to 782,000 tons in 2015/16. The United States is forecast to lead in export volume, although its exports are projected down 9% to 2.2 million tons due to a smaller volume of production in 2015/16. After declining 48% in 2014/15, India’s exports may recover 34% to 1.2 million tons. Exports in the next three largest exporting countries are likely to decrease due to reductions in their exportable surplus. Brazil’s exports are forecast down 10% to 766,000 tons, Uzbekistan’s down 5% to 565,000 tons and Australia’s down 10% to 467,000 tons.
World cotton area is projected to fall 7% to 31.1 million hectares in 2015/16 due to significantly lower cotton prices in 2014/15. As a result, world cotton production is expected to fall by 9% to 23.8 million tons. India’s cotton area is estimated down 5% to 11.6 million hectares, and production down 2% to 6.4 million tons. China’s cotton production is set to decline by 16% to 5.4 million tons due to a 12% reduction in area and a 5% decrease in the average yield as a result of unfavorable weather. After a 24% expansion in 2014/15, cotton area in the United States has receded 13% to 3.3 million hectares with production declining 11% to 3.2 million tons. Pakistan’s production is projected down 11% to 2.1 million.
World cotton consumption could grow 2% in 2015/16 to 25 million tons with consumption growth remaining flat or slowing in many countries compared with last season. Consumption in China, the largest cotton consuming country, is expected to remain flat in 2015/16 at 7.7 million tons. India’s consumption growth is expected to slow to 3%, reaching 5.6 million tons, while Pakistan’s consumption growth remains steady at 2%, reaching 2.6 million tons.
Bangladesh has proposed the Indian government to set up a textile park in Gujarat state.
Bangladesh has zeroed in on Kadi near Ahmedabad for the project which involves an initial investment of Rs 240-300 crore. To begin with, the park will have spinning units with cumulative capacity of 1 lakh spindles. Bangladesh has sought around 100 acres of land from the state government for the project. Last month, a high level trade delegation comprising representatives of the Federation of Bangladesh Chambers of Commerce and Industry, Bangladesh Cotton Association and Bangladesh Garment Manufacturers and Exporters Association visited Gujarat. These apex trade bodies have now approached the state government with a proposal to set up a textile park.
Globally, Bangladesh is among the top garment manufacturing and exporting countries. However, it has to bank on India, especially Gujarat, for cotton and yarn.
Gujarat has aggressive textile policy with incentives for spinning activities. Availability of power and raw material (cotton) is attracting many companies to set up their spinning units in the state. Bangladesh imports close to 55 lakh bales (one bale weighs 170 kg) annually, of which 70% is accounted by India, while Gujarat has the largest share in cotton exported to Bangladesh.
- ICE COTTON
ICE Cotton is locked in sideways and choppy 57-68 range since months. Time spent in forming base gives a directional bias that Cotton is bottoming out and may enter Bull Market again. Confirmation of directional bull market comes when it is able to move past hurdle of 68 areas. Similarly continuation of Bear Market is confirmed below 57 areas. Till the time breakout or breakdown comes, Traders can sell closer to 68 with stops and buy closer to 57 with stops for short to medium term.
Key Supports 60.97-58.48-57.05-54.97,
Key Resistances 65.03-68.30-70.30-71.50.
- MCX COTTON
Buy on dips was suggested closest to 15700 in last newsletter, MCX Cotton turned up from 15630.
MCX Cotton remains sideways but lot more volatile and choppy as compared to ICE Cotton. 16600 areas offering stiff resistances as of now. Sharp upmove in MCX expected only above 16600 hurdle. Bias still remains positive and Cotton looks buy on dips closest to 15600 areas. Traders can go short in MCX Cotton only below 15600. Key Supports 15630-15170-14670-14360-13970, Key Resistances 16610-16890-17250-17550-18200.
Exclusive Interview with Mr. B. K. Mishra, CMD, CCI
Exclusive interview with thought leader Mr. Suresh Kotak, Chairman of Kotak & Co.
About the author: Mr. Manish Daga popularly referred by the cotton industry as COTTON GURU™ is a qualified textile technologist.
He is India’s only Cotton Valuer registered by the Indian Institution of Valuers, India. He is the fourth generation in cotton trade, advisory and broking services from his family. The P. R. D. Cottons Group is 112 year old in cotton business with continuity.
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FIRST AND ONLY REGISTERED“COTTON VALUER” IN INDIA
Mr. Manish Daga