'Cotton exports may decline in next season'– Rahul, Acme (India)

Cotton also called ‘white gold’ has been cultivated by man for several thousand years and also enjoys a predominant position among all cash crops, with developing countries accounting for a major portion of the cotton output. Global cotton consumption has increased at an average of 2% per annum.

This year, world cotton production is estimated at 25.5 million tons and consumption at 24 million tons, with an expected surplus of 1.5 million tons. China now has 3 million tons accumulated cotton reserves. The key question in everyone’s mind is whether China will slow down on buying further for their reserves.

The top cotton producers of the world are China, India and USA which account for 63% of the cotton produced. Top cotton consumers of the world are China, India and Pakistan which account for 67% of the cotton consumed globally.

In order to understand the dynamics of the global and Indian cotton business, fibre2fashion spoke exclusively with Mr Rahul Jitendra Shah– the young and dynamic MD of Ahmedabad-based Acme International, which is primarily involved in trading and exports of cotton, yarn and fabrics.

Mr Shah said, “Globally, cotton business is controlled by big cotton trading companies, who are classified as handling or trading in 200,000 tons of cotton or more per year. The number of such big companies has fallen from 22 in the past to 10 last year”.

He added, “However, this indicates a consolidation as the number of major global cotton trading companies is falling. However, these top ten handle more volume then what was earlier handled by 22. The trend also shows the bigger companies will keep on growing bigger taking a bigger market share while the smaller ones will cease to exist”.

Mr Shah is also of the opinion that, in the past, cotton futures have always stayed in the range of 60 to 80 cents/lbs with the exception of last year when it peaked to US $2.00/lbs, a one off case. He expects that cotton futures will rule around 80 cents/lbs in the coming year.

He also said that cotton and yarn prices show a lot of correlation and hence lower cotton prices in the coming year would also result in lowering of yarn prices. He expects Indian cotton exports to decline by 10% to 15% in the coming season.

He explained, “This is mainly because of lower area under cotton acreage as farmers in the coming season are expected to switch to better remunerative crops likes groundnut, rice, wheat due to lower realization in cotton. This trend will be seen more in Punjab and Maharashtra”.

According to him, the important factors which will influence international cotton prices are; unfavourable government polices, oil prices, business climate, exchange rates, growth in cotton acreage in the ASEAN region, with a simultaneous decrease in India and China, the two biggest producers.