Global Cotton Price Forecast - November 2012

Sentiment in the cotton market remained bearish and a little way of a recovery in demand emerged with government policies in China and India, particularly tending to complicate the market rather than support cotton trading. India placed restrictions on cotton volume export on a monthly basis, limiting opportunities for major traders to transact at favourable conditions.

In China, the government cotton reserve was already purchasing from the current crop despite warehouse reaching their storage capacity. There are concerns over lack of clarity regarding government’s policy on disposing stock both in the domestic as well as in international cotton trade.

Latest statistics show that in 2012-13 cotton season production will be higher than expected in the three largest producers, China, India and the USA, with global production forecast at 25-26 million tons. Against this demand would lag behind pegged in the range of 22-23.5 million tons.

The Indian government has revised its minimum support price (MSP) for medium staple cotton from Rs. 2,800 a quintal to Rs 3,600 a qtl and for long staple cotton from Rs ,3300 a qtl to Rs 3,900 a qtl for cotton season 2012-13. The Cotton Advisory Board has estimated cotton production in the country at 33.4 million bales, consumption at 26 million bales and an exportable surplus at 0.70 million bales.

Although domestic consumption is showing increasing trends, the sharp decline in global trade and increase in world stocks have imposed a downward stress on cotton prices. Domestic prices have touched MSP levels in some markets of Andhra Pradesh and are close to MSP levels in Maharashtra, Punjab, Rajasthan and Madhya Pradesh.