Cotton growers at the bottom of the heap

Crying seems justified.

What else could we expect form farmers? With cotton changing hands at Rs5000 per maund in the local cotton market, fibre prices are down by more than half compared to the record high prices the local cotton market has touched earlier this year.

All blame goes to a drastic drop in the fibres prices in the international market.

The Cotlook A Index - which is the average of the cheapest five quotations traded internationally - is hovering around 93 cents per pound, nearly down by 59 percent compared to the average index at around $2.29 per pound in March, 2011.

In essence, higher cotton output, coupled with renewed fears of global recession and slowdown in manufacturing activity in China, is dragging on cotton prices.

Since cotton price had skyrocketed in the last season, cotton growers could not resist planting more seeds in the current season.

Hence, farmers are expected to harvest a total of 123 million bales of cotton around the world in 2011-12, marking a growth of a whopping 7 percent compared to the last year, according to USDA.

Adding to woes, the global consumption is anticipated to ease down by 2 percent to 111.3 million bales, on account of a slowdown in demand for readymade textile products.

The glut in production will channel surplus output to the global stockpiles.

As the global ending stock level is forecasted to increase by a quarter to 57.6 million bales, the worlds ending stock to use ratio will improve to 52 percent in 2011-12 as opposed to 40 percent in the last year.

A slump in fibre prices is a good news for manufacturers, but not for those who are sitting on a large heap of cotton inventory, which was accumulated during the period when market prices were high.

Domestic output is also expected to err on a high side.

The Cotton Crop Assessment Committee (CCAC) estimates the output at 12.598 million bales; nearly 9 percent higher compared to the last seasons output.

But, many growers and cotton brokers are sceptical over CCACs estimates, foreseeing local output to surpass 14 million bales in the current season, on account of an expansion in cotton harvested area and the wide use of BT seed.

USDAs estimates stand close to CCAC.

It predicted the country to harvest 10 million bales in 2011-12, which is equivalent to 12.8 million bales if weighted in standard local size of 375 pounds per bale.

Whichever estimate one goes by, a higher cotton output may not be very thrilling for cotton farmers.