Cotton arrivals slow down

The Cotton Association of India (CAI) has released its December estimate of the cotton crop for the 2015-16 season, which began on 1st October 2015. The CAI has placed its December estimate of the cotton crop for the 2015-16 season at 357.00 lakh bales of 170 kg each.

The projected Balance Sheet drawn by the CAI estimated total cotton supply for the season 2015-16 at 449.65 lakh bales while the domestic consumption is estimated at 315.00 lakh bales, thus leaving an available surplus of 134.65 lakh bales.

The arrivals of cotton during the ongoing 2015-16 crop year are estimated to be lower than those up to the same period last year. This is due to the fact that the farmers are holding back seed cotton expecting better prices. The arrivals are lower this year also due to the relatively lower crop estimated for the 2015-16 crop year compared to the last year.

The central government’s decision to regulate and control the maximum sale price of cotton seeds from March upset the seed companie. The Union Agriculture Ministry recently issued the Cotton Seeds Price (Control) Order for “uniform regulation” of sale price of cotton seeds with existing and future genetically modified technologies. While the order aims to control the license fee, royalty trait fee and licensing terms on which the technology providers make available innovative technologies, the companies see this order directly squeezing their profit margin.

Meanwhile, India’s spinning industry in the textile sector runs the risk of taking a hit due to the downturn in the Chinese economy. China accounts for 40 per cent of India’s total cotton yarn exports which is likely to come down and create a glut in the domestic market, according to a newspaper report. The Indian apparel exports are also likely to be impacted due to a depreciation of the Yuan. India’s garment exports had been growing at a rate of 7-8 per cent till December of the current fiscal against an anticipated growth of 13-15 per cent, the report said. India’s apparel exports to markets like Europe and the US have been sluggish due to overall economic slowdown.

The weakening of Yuan by 3 per cent and apprehensions of further depreciation of Chinese currency has sparked concerns for the Indian textile industry as China is a major competitor of garments and made-ups and importer of cotton yarn from India. Of the total $40 billion worth textiles and clothing exports from India, garment exports are worth $16 billion, while yarn, fabric and made-ups together amount to $21 billion. India’s strength lies in the value-added, hand-embroidered, casual fashion garments consisting of small orders, whereas China has its strength in high value, basic garments. If depreciation of Yuan continues, Indian garment exporters could be affected as both countries have access to the common markets of US and European Union, said Rahul Mehta, President International Apparel Federation and Clothing Manufactures’ Association of India.