Fundamentals of Cotton Fundamentals of Cotton Presented by : Chowda - - PowerPoint PPT Presentation

Fundamentals of Cotton Fundamentals of Cotton

Presented by : Chowda Reddy

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Commodities Research Desk

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 More than 25 varieties are cultivated in India Provides employment to 4-5 million people Cl ifi d b d Fib l th Classified based on Fibre length

• 1. Short staple
• 2. Medium staple

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• 3. Long and Extra long staple

Classification and percentage share

Staple Length Short Below 20.0 mm Medium 20.5 to 25.5 mm Medium Long 26.0 to 27.5 mm L 28 0 33 5 Long 28.0 to 33.5 mm Extra Long 34 mm & above

E t L Short 3% M di Extra Long 2% Medium 27% M di

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Medium Long 17% Long 51%

Cotton products

Cotton Lint (Fibre) Seed

T til Oil (15%) C k (83%) Textile Oil (15%) Cake(83%)

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Seasonality of Cotton

J F b M A M J J l A S O t N D Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec China US I ndia Pakistan Brazil Brazil Uzbekistan

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Sowing Growth Stage Harvesting

Cotton production in India

USDA estimated output in India at 314 lakh bales in 2007-08

Cotton production in India

p Production increased by 35 lakh bales from last year A i d b 4 13 l kh h t t 90 45 l kh h t i Area increased by 4.13 lakh hectares to 90.45 lakh hectares in 2007-08 Gujarat 110 120 lakh bales and Maharashtra 70 lakh bales Gujarat - 110-120 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

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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 P d ti 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 T t l D C 173 170 170 173 190 214 232 232 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

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Source: USDA

Major producing states

Cotton Production share of States

Haryana Oth

j p g

Haryana 6% MP 7% Gujarat 38% Others 7% Punjab 10% Maharashtra 19% Andhra Pradesh 13% Gujarat Maharashtra Andhra Pradesh Punjab Madhya Pradesh Haryana Others

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Domestic consumption

C ti 00 01 01 02 02 03 03 04 04 05 05 06 06 07 07 08

Domestic consumption

Lakh bales

Consumption 00-01 01-02 02-03 03-04 04-05 05-06 06-07 07-08 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

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Sources : CAB

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%) China is largest consumer (38%)

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World Cotton Balance sheet World Cotton Balance sheet

Million bales

Area Beginni 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 53.53 000/0 3 65 3 3 3 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 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

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Major producing countries 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 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

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Textiles

Textile Fibres

Textiles

Textile Fibres

Natural Fibres Man – m ade Fibres

Plant (Cellulose) – Cotton Animal (hair.cocoon) Organic Inorganic (carbon, ceramic & glass)

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Cotton Textiles

Cotton accounts for 60% of textile consumption Cotton textiles exports – Rs.49816 crores in 2006-07 p Cotton constitutes 34% of total textile exports India’s textile industry likely to grow at 16% to $115 India s textile industry likely to grow at 16% to $115 billion by 2012 Man made Fibre is competitor for Cotton Man – made Fibre is competitor for Cotton

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Cotton Textiles

Man-made Fibre production has almost doubled during 1990-2005 to 32 million tonnes, while cotton output i d b 31% t 25 illi t 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 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 Trade quotas abolished in 2005 by developed countries

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Kapas khali

Seed separated from cotton is further processed and by- products 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 j j Most of the oil seed cake consumed domestically

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Domestic scenario of Kapas khali

(Qty in Million tonnes)

p

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 04 4 3 2 0 1 2 0 2003-04 4.3 2.0 1 2.0 2004-05 5.9 2.8 1 2.8 2005-06 6.0 2.8 2.8 2006-07 6.6 3.1 3.1 2007-08 7.4 3.5 3.5

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Source: USDA

NCDEX contract specifications

Name of Commodity V 797 Kapas Basis Ex- warehouse Surendernagar (Exclusive of all taxes ) Basis Ex warehouse Surendernagar (Exclusive of all taxes ) Unit of trading 1 lot (200 maunds of 20 kg each i.e. 4 MT) Quotation/base value

• Rs. Per 20 kg

Tick size 10 paisa Trading month Contract for March, April and May expiry next year will open for trading in May 10 of preceding year will open for trading in May 10, of preceding year Delivery center Surendranagar (Gujarat) Delivery Sellers option

MCX – contract specifications are similar

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Bandhini contract – price limit is Rs.345.10 – Rs.505.10

Shankar Kapas contract specifications

Name of Commodity SHANKAR Kapas Ticker Symbol SHANKRKPAS

p p

Basis Average of spot prices of the following stations Rajkot, Gondal, Kadi, Vijapur (Exclusive of VAT) Unit of trading 1 lot (200 maunds of 20 kg each i.e. 4 MT) D li it 1 l t (200 d f 20 k h i 4 MT) Delivery unit 1 lot (200 maunds of 20 kg each i.e. 4 MT) Quotation/base value

• Rs. Per 20 kg

Tick size 10 paisa Q li ifi i C Quality specifications Raw Cotton

• 1. Staple Length

Basis : 28.5-29 mm Delivery center Rajkot and Kadi (Gujarat) at Par y j ( j ) Additional Delivery centers 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.

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Position limit Member: Maximum of 75,000 MT for all contracts Client: Maximum of 15,000 MT for all contracts

NYBOT Cotton

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Prices of Lint cotton (S 6) Prices of Lint cotton (S 6)

24 000 20 000 22,000 24,000

ndy

16 000 18,000 20,000

Price per Can

12,000 14,000 16,000 12,000 Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sept 2003-04 2004-05 2005-06 2006-07

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Source: Cotton Corporation of India

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

Monthly Average Cotlook A Index 80

g p q (currently 19) of cotton traded globally

70 50 60 40

A u g u s t S e p t e m b e r O c t

• b

e r N

• v

e m b e r D e c e m b e r J a n u a r y F e b r u a r y M a r c h A p r i l M a y J u n e J u l y

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S e p O N

• D

e J F 2004-05 2005-06 2006-07 2007-08

In US Cents per lb

Cotlook Index A

Cents per Lb Cents per Lb

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NYBOT Cotton

Cents per Lb

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Kapas NCDEX April contract

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Supports – 505, 485 and Resistance – 545, 570

NCDEX Cocud May contract

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Supports – 377, 334 and Resistance – 476, 500

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 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 and this year these exports are India exported 65 lakh bales in 2006-07 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 Arrivals of cotton declined to below one lakh bales from 2.5 lakh bales in December Current arrivals are around 80000 bales

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Factors to be watched out (contd…)

Cotlook A Index made 10 year high of 92 cents 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 o tp t than 5% of total cotton output Factors influencing the prices Production (both domestic and global) A i l i d ti k t Arrivals in domestic markets Exports from India Global prices (NYBOT and Cotlook A Index)

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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 Gl b l i d 10 hi h f 92 Lb Global cotton prices made 10 years high of 92 cents per Lb Prices are likely to take some correction in near term Long term sentiments still remain strong with lower global Long term sentiments still remain strong with lower global

• utput

Cotton prices may touch Rs 24000-25000 per candy in long Cotton prices may touch Rs.24000-25000 per candy in long term Kapas khali prices may touch Rs.1000 per quintal in 4-5

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Kapas khali prices may touch Rs.1000 per quintal in 4 5 months

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