Mill consumption may lower cotton exports

With the country's mill consumption of cotton set to increase, exports are likely to dip by 12 lakh bales in 2007-08. In the Asian region, mill usage is expected to rise in China and Pakistan, according to a survey, jointly carried out by the International Cotton Advisory Committee (ICAC) and the Commodities and Trade Division of the Food and Agriculture Organization of the United Nations.

On the other hand, mill usage in developed countries like the US, Japan, European countries, Taiwan and Hong Kong is likely to dip, which may result in higher exports of cotton from these countries.

According to the survey released in June, the trend of increasing mill usage in developing countries will continue through 2007-08. India's total exports of cotton is likely to go down by 12 lakh bales (170 kg each), from the record 10 lakh tonnes (44 lakh bales) in 2006-07 to 7 lakh tonnes (32 lakh bales) in 2007-08. The domestic consumption is expected to increase by 6 per cent to 1.9 crore bales this year.

"The world cotton mill use is projected to increase by 2.6 per cent to 2.68 crore tonnes (12.3 crore bales) in 2007-08... Mill use is expected to increase by 5 per cent in China (Mainland) to 1.1 crore tonnes (5.1 crore bales), by 6 per cent in India to 42 lakh tonnes (1.9 crore bales) and by 2 per cent in Pakistan to 26 lakh bales (1.2 crore bales)," the study said.

These three countries would account for 67 per cent of the world mill use in 2007-08 compared with 65 per cent in 2006-07. Mill use is also expected to increase in Bangladesh, Vietnam and Indonesia, but is expected to remain stable or to decline in most other developing countries.

The study shows a clear shift in the mill usage of cotton from developed countries to developing countries. "Industrial countries are expected to continue their long-term decline to 16 lakh tonnes (75 lakh bales), down 8 per cent from 2006-07. In particular, the US mill use is forecast to decline by 10 per cent to 960,000 tonnes (44 lakh bales) in 2007-08. Mill use is also expected to decline in central and eastern European countries but to increase slightly in countries of the former USSR," the study said.

This trend of larger consumption by developing countries will result in the decline of cotton exports from these countries. On the other hand, exports from developed countries are expected to grow. Interestingly, even though India is bound to produce a record 2.16 crore bales, its exports are likely to decline by 12 lakh bales.

"Exports from most other large exporting countries are forecast stable or declining. In particular, Indian exports are expected to decline from their record of 10 lakh tonnes (44 lakh bales) to 700,000 tonnes (32 lakh bales), as domestic mills should consume increasing quantities of the domestic production," the study said.

With increased domestic consumption, developed countries are likely to feed the raw material needs of developing countries. "The US exports are projected at 36 lakh tonnes in 2007-08 (1.65 crore bales), which is 25 per cent higher than the last season, driven by large stocks, expected increased demand from China (mainland), and lower competition from Indian exports," the study pointed out.

The world cotton production is also likely to go down, even though countries like India are poised to produce huge crops this year. The world cotton production is expected to decline slightly in 2007-08 to 2.5 crore tonnes (11.5 crore bales), down 1 per cent from the last season. The production in China (mainland) is forecast slightly down from the record reached in 2006-07 to 67 lakh tonnes (3.6 crore bales).

The cotton production in India is, meanwhile, expected to reach a record of 47 lakh tonnes (2.16 crore bales), up 2 per cent from 2006-07, making it the second biggest producer behind China (mainland).

According to an Ahmedabad-based cotton trader and analyst, the study indicates that the prices of cotton may not go down as the world demand and consumption are expected to increase. "Even though exports are projected to go down, domestic consumption is likely to grow. As far as the prices are concerned, they are likely to remain stable or go up in the given scenario," he said.