Fundamentals of Cotton Presented by : Chowda Reddy Commodities Research Desk 1
Introduction Cotton - King of Fibres (belongs to the order Malvales, family Malvaceae) Sowing : June - July, Harvest: September December Arrivals extend till April More than 25 varieties are cultivated in India Provides employment to 4-5 million people Classified based on Fibre length 1. Short staple 2. Medium staple 3. Long and Extra long staple 2
Staple Length Short Below 20.0 mm Medium 20.5 to 25.5 mm Medium Long 26.0 to 27.5 mm Long 28.0 to 33.5 mm Extra Long 34 mm & above Classification and percentage share Et Extra Long 2% Short 3% Medium 27% Long 51% Medium Long 17% 3
Cotton products Cotton Lint (Fibre) Seed Textile Oil (15%) Cake(83%) 4
Seasonality of Cotton Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec China US India Pakistan Brazil Uzbekistan Sowing Growth Stage Harvesting 5
Cotton production in India USDA estimated output in India at 314 lakh bales in 2007-08 Production increased by 35 lakh bales from last year Area increased by 4.13 lkhh lakh hectares to 90.45 lkhh lakh hectares in 2007-08 Gujarat - 110-120120 lakh bales and Maharashtra - 70 lakh bales Annual output growth rate 10.76% between 1999-00 & 2007-08 Bt Cotton occupies about 40% total cotton area 6
India Cotton Balance sheet Quantity in Lakh bales 2000 2001 2002 2003 2004 2005 2006 2007 Particulars -01-02 -03-04 -05-06 -07-08 Beginning Stocks 63 48 66 46 54 112 103 94 Production (Lakh bales) 140 158 136 179 243 244 279 314 Imports 20 31 16 10 13 5 5 5 Total Supply 223 236 217 235 310 361 388 413 Exports 1 1 1 9 8 44 61 78 TtlD Total Dom. Cons. 173 170 170 173 190 214 232 232 Ending Stocks 48 66 46 54 112 103 94 103 Stock to Use % 27.67 38.44 26.85 29.48 56.69 41.42 30.75 27.84 Source: USDA 7
Major producing states Cotton Production share of States MP 7% Haryana 6% Others 7% Gujarat 38% Punjab 10% Andhra Pradesh 13% Maharashtra 19% Gujarat Maharashtra Andhra Pradesh Punjab Madhya Pradesh Haryana Others 8
Domestic consumption Lakh bales Consumption 00-0101 01-0202 02-0303 03-0404 04-0505 05-0606 06-0707 07-0808 Mill consumption 149.36 147.00 142.42 150.39 163.98 182.00 194.89 207.00 Small Mill 10.97 11.70 11.63 13.00 16.57 20.00 21.26 23.00 consumption Non-Mill consumption 12.70 13.06 14.78 13.71 14.48 15.00 15.88 15.00 Total consumption 173.03 171.76 168.83 177.10 195.03 217.00 232.03 245.00 Export 1 1 1 9 8 44 61 78 Total disappearance 173.63 172.26 169.67 189.21 204.17 264.00 290.03 310.00 Sources : CAB 9
World production Global production estimated at 152 million bales in 2007-08 down from 156 million bales last year China is largest producer and contributes to one-third of total global output India and US are other major producers and has share of 36% India has overtaken US in terms of output during 2007-08 China is largest consumer (38%) 10
World CottonBalance sheet Million bales Area (Mln Ha) Beginni ng Stocks Productio n Imports Total Supply Exports Ending Stocks Stock to Use % 2000/01 32 65 114 34 213 34 63 53.53 2001/02 34 63 126 38 227 37 70 58.08 2002/03 30 70 113 39 222 39 58 46.16 2003/04 32 58 122 44 224 43 57 45.10 2004/05 36 57 156 43 256 45 73 52.78 2005/06 35 73 151 57 281 57 77 51.75 2006/07 35 77 156 48 281 48 78 49.52 2007/08 34 78 152 50 281 50 76 47.54 11
Major producing countries Lakh Bales Country 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 China 260 312 289 286 397 378 455 448 India 140 158 136 179 243 244 279 314 USA 220 260 220 234 298 306 276 244 Pakistan 107 106 102 100 143 130 127 115 Brazil 55 45 50 77 76 60 90 91 Others 358 383 334 344 407 389 337 311 Total 1141 1264 1132 1220 1563 1507 1563 1523 12
Textiles Textile Fibres Natural Fibres Man made Fibres Plant (Cellulose) Cotton Animal (hair.cocoon) Organic Inorganic (carbon, ceramic & glass) 13
Cotton Textiles Cotton accounts for 60% of textile consumption Cotton textiles exports Rs.49816 crores in 2006-07 Cotton constitutes 34% of total textile exports India s textile industry likely to grow at 16% to $115 billion by 2012 Man made Fibre is competitor for Cotton 14
Cotton Textiles Man-made Fibre production has almost doubled during 1990-2005 to 32 million tonnes, while cotton output increased by 31% to 25 million tonnes Consumption of Man-made Fibre has increased at an annual rate of 4.7% in global market, while cotton rose by 1.8% per annum between 1960 and 2002 Trade quotas abolished in 2005 by developed countries 15
Kapas khali Seed separated from cotton is further processed and byproducts are kapas kali (oil seed cake) and oil Crushing starts from October and extends till June Oil seed cake (82-85%), oil (12-14%) and wastage (2-3%) Cake used as cattle feed and oil used for edible purpose Demand comes from Gujarat and Rajasthan Most of the oil seed cake consumed domestically 16
Domestic scenario of Kapas khali (Qty in Million tonnes) Year Crush Production Exports (1000 MT) Domestic consumption 2000-01 3.7 1.7 1 1.7 2001-02 3.8 1.8 7 1.8 2002-03 3.4 1.6 2 1.6 2003-0404 43 4.3 20 2.0 1 20 2.0 2004-05 5.9 2.8 1 2.8 2005-06 6.0 2.8 0 2.8 2006-07 6.6 3.1 0 3.1 2007-08 7.4 3.5 0 3.5 Source: USDA 17
NCDEX contract specifications Name of Commodity V 797 Kapas Basis Ex- warehouse Surendernagar (Exclusive of all taxes ) Unit of trading Quotation/base value Tick size Trading month Delivery center Delivery 1 lot (200 maunds of 20 kg each i.e. 4 MT) Rs. Per 20 kg 10 paisa Contract for March, April and May expiry next year will open for trading in May 10, of preceding year Surendranagar (Gujarat) Sellers option MCX contract specifications are similar Bandhini contract price limit is Rs.345.10 Rs.505.10 18
Name of Commodity Ticker Symbol Basis Unit of trading Shankar Kapas contract specifications SHANKAR Kapas SHANKRKPAS Average of spot prices of the following stations Rajkot, Gondal, Kadi, Vijapur (Exclusive of VAT) 1 lot (200 maunds of 20 kg each i.e. 4 MT) Dli Delivery unit 1 lot (200 maunds of 20 kg each i.e. 4 MT) Quotation/base value Tick size Rs. Per 20 kg 10 paisa Quality specifications i Raw Cotton 1. Staple Length Basis : 28.5-29 mm Delivery center Rajkot and Kadi (Gujarat) at Par Additional Delivery centers Position limit Goods meeting contract specifications may also be delivered at Guntur and Akola. The locational Premium/Discounts for Akola and Guntur will be announced before the launch of the contracts. Member: Maximum of 75,000 MT for all contracts Client: Maximum of 15,000 MT for all contracts 19
NYBOT Cotton 20
Prices of Lint cotton (S 6) 24,000 22,000 Price per Can ndy 20,000000 18,000 16,000 14,000 12,000 Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sept 2003-04 2004-05 2005-06 2006-07 Source: Cotton Corporation of India 21
Cotlook Index A The COTLOOK A INDEX is representative of the level of offering prices on the international raw cotton market It is an average of the cheapest five quotations from a selection (currently 19) of cotton traded globally 80 Monthly Average Cotlook A Index 70 60 50 40 August September October November December January February March April May June July 2004-05 2005-06 2006-07 2007-08 In US Cents per 22 lb
Cotlook Index A Cents per Lb 23
NYBOT Cotton Cents per Lb 24
Kapas NCDEX April contract Supports 505, 485 and Resistance 545, 570 25
NCDEX Cocud May contract Supports 377, 334 and Resistance 476, 500 26
Factors to be watched out Global cotton output estimated at 152 million bales during 2007-08 marginal lower than 156 million bales in 2006-07 Cotton output India estimated at 314 lakh bales in 2007-08 higher than 279 lakh bales in 2006-07 India exported 65 lakh bales in 2006-07 07 and this year these exports are likely to touch 10 million bales (already 78 lakh bales exported) Strong export demand seen from China and Pakistan Arrivals of cotton declined to below one lakh bales from 2.5 lakh bales in December Current arrivals are around 80000 bales 27
Factors to be watched out (contd ) Cotlook A Index made 10 year high of 92 cents Correction between NCDEX Kapas and NYBOT Cotton: 0.8 NCDEX and MCX have contracts for V - 797 variety, but it has less than 5% of total cotton output t Factors influencing the prices Production (both domestic and global) Arrivals in domestic markets Exports from India Global prices (NYBOT and Cotlook A Index) 28
Price outlook Cotton prices have moved up by Rs.170 per 20 Kgs (NCDEX April) and Kapas khali prices also moved by Rs. 120 per 20 kgs (NCDEX March) in the last 3-4 months Global l cotton prices made 10 years high h of 92 cents per Lb Prices are likely to take some correction in near term Long term sentiments still remain strong with lower global output Cotton prices may touch Rs.24000-25000 per candy in long term Kapas khali prices may touch Rs.1000 per quintal in 4-5 months 29
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