India's cotton output to fall to 5.4 mt in 2012-13
India's cotton production, after two years of record levels, is expected to decline by 7% to 5.4 million tonne in 2012-13 compared to 5.9 million tonne in 2011-12.
Lower cotton prices will drive cotton area down by 10% to 11 million hectares.
No Related Stories Found
However, cotton mill use in India is expected to rebound by 7% to 4.7 million tonne in 2012-13 (lower prices, improved global economic growth) after a drop of 4% in 2011-12.
International Cotton Advisory Committee (ICAC) executive director Terry Townsend told Business Standard: "India's exports are projected at 750,000 tonne, down by 61% from the previous season, due not only to reduced domestic production and increased domestic mill use but also to stronger competition with other countries for a smaller global export pie."
Townsend said the projected reduction in production in India in 2012-13 will take place in the context of a similar decline in world production (-8% to 24.9 million tonne), driven by a decline in international cotton prices.
Meanwhile, ICAC, which is an association of governments of cotton producing and consuming countries, in its projection said global cotton trade is expected to drop by 18% to 7.6 million tonne due to a projected slow down in Chinese purchases.
The continued accumulation of global stocks and the decline in the volume of international trade will weigh on cotton prices. After a 20% jump to 9.2 million tonne in 2011-12, the volume of cotton traded internationally is expected to drop by 18% to 7.6 million tonne in 2012-13.
Global 2012-13 cotton production is forecast at 24.9 million tonne, down by 8% from this season. The decline in prices during 2011-12 has driven cotton plantings down this year in many countries.
“High and volatile prices and a slowing global economy drove demand for cotton yarn down. Increased cotton trade in 2011-12 is due to a near doubling of shipments to China to 5.1 million tonne. Chinese mills have turned to imports to compensate for the shortage of domestic cotton caused by the rebuilding of the national reserve.
"In addition, large quantities of cotton were imported by the Chinese government specifically to help rebuild that national reserve. In contrast cotton deliveries to other countries than China have fallen by 18% in 2011-12," ICAC said.
According to ICAC, a small rebound in global cotton mill use is projected in 2012-13, on the basis of lower prices and a more robust global economy. This improved demand will boost cotton imports, but not enough to offset the expected drop in demand by China, which now holds large stocks. Imports by China are projected to fall by almost half to 2.7 million tonne in 2012-13, whereas imports by the rest of the world could rebound by 18% to 4.9 million tonne.
On the other hand, exports from the United States and Francophone Africa are expected to increase in 2012-13, due to increased production. However, most other large exporting countries will experience a decline in their shipments due to a smaller crop and increased competition for a reduced export pie.