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

Fundamentals of Cotton Fundamentals of Cotton Presented by : Chowda Reddy Commodities Research Desk 1

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 Classified based on Fibre length Cl ifi d b d Fib l th 1. Short staple 2. Medium staple 3. Long and Extra long staple 2

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 Long 28 0 28.0 to 33.5 mm 33 5 Extra Long 34 mm & above Short 3% M di Medium E t Extra Long L 27% 2% M di Medium Long Long 51% 17% 3

4 Cake(83%) C k (83%) Seed Cotton products Cotton Oil (15%) Oil (15%) Lint (Fibre) Textile til T

Seasonality of Cotton Jan J F b Feb M Mar A Apr M May Jun J J l Jul A Aug S Sep O t Oct N Nov D Dec China US I ndia Pakistan Brazil Brazil Uzbekistan Harvesting Sowing Growth Stage 5

Cotton production in India Cotton production in India USDA estimated output in India at 314 lakh bales in 2007-08 p Production increased by 35 lakh bales from last year Area increased by 4.13 lakh hectares to 90.45 lakh hectares in A i d b 4 13 l kh h t t 90 45 l kh h t i 2007-08 Gujarat Gujarat - 110-120 lakh bales and Maharashtra - 70 lakh bales 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 6

India Cotton Balance sheet Quantity in Lakh bales 2000 2001 2002 2003 2004 2005 2006 2007 -01 -02 -03 -04 -05 -06 -07 -08 Particulars Beginning Stocks 63 48 66 46 54 112 103 94 P Production d ti (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 Total Dom. Cons. T t l D C 173 173 170 170 170 170 173 173 190 190 214 214 232 232 232 232 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 Source: USDA 7

Major producing states j p g Cotton Production share of States Haryana Haryana Oth Others 6% 7% Gujarat 38% MP 7% Punjab 10% Andhra Pradesh 13% Maharashtra 19% Gujarat Maharashtra Andhra Pradesh Punjab Madhya Pradesh Haryana Others 8

Domestic consumption Domestic consumption Lakh bales Consumption C ti 00 01 00-01 01 02 01-02 02 03 02-03 03 04 03-04 04 05 04-05 05 06 05-06 06-07 06 07 07 08 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 12.70 13.06 14.78 13.71 14.48 15.00 15.88 15.00 consumption Total 173.03 171.76 168.83 177.10 195.03 217.00 232.03 245.00 consumption 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 Sources : CAB 9

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%) 10

World Cotton Balance sheet World Cotton Balance sheet Million bales Area Area Beginni Beginni (Mln ng Productio Total Ending Stock to Ha) Stocks n Imports Supply Exports Stocks Use % 2000/01 000/0 32 3 65 65 34 3 213 3 3 34 63 63 53.53 53.53 114 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 44 224 43 57 45.10 122 2004/05 36 57 43 256 45 73 52.78 156 2005/06 2005/06 35 35 73 73 151 151 57 57 281 281 57 57 77 77 51 75 51.75 2006/07 35 77 156 48 281 48 78 49.52 2007/08 34 78 50 281 50 76 47.54 152 11

Major producing countries Major producing countries Lakh Bales 2000- 2001- 2002- 2003- 2004- 2005- 2006- 2007- Country 01 02 03 04 05 06 07 08 260 312 289 286 397 378 455 448 China India 140 158 136 179 243 244 279 314 USA USA 220 220 260 260 220 220 234 234 298 298 306 306 276 276 244 244 Pakistan 107 106 102 100 143 130 127 115 55 45 50 77 76 60 90 91 Brazil Others 358 383 334 344 407 389 337 311 Total 1141 1264 1132 1220 1563 1507 1563 1523 12

Textiles Textiles Textile Fibres Textile Fibres Natural Man – m ade Fibres Fibres Plant (Cellulose) – Animal Organic Inorganic (carbon, Cotton (hair.cocoon) ceramic & glass) 13

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 Man – made Fibre is competitor for Cotton made Fibre is competitor for Cotton 14

Cotton Textiles Man-made Fibre production has almost doubled during 1990-2005 to 32 million tonnes, while cotton output i increased by 31% to 25 million tonnes d b 31% t 25 illi t 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 15

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 16

Domestic scenario of Kapas khali p (Qty in Million tonnes) Exports Domestic Year Crush Production (1000 MT) 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 2003-04 4 3 4.3 2 0 2.0 1 1 2 0 2.0 2004-05 5.9 2.8 1 2.8 2005-06 6.0 2.8 0 2.8 2006-07 6.6 3.1 0 3.1 2007-08 7.4 3.5 0 3.5 Source: USDA 17

NCDEX contract specifications Name of Commodity V 797 Kapas Basis Basis Ex- warehouse Surendernagar (Exclusive of all taxes ) 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 Bandhini contract – price limit is Rs.345.10 – Rs.505.10 18

Shankar Kapas contract specifications p p Name of Commodity SHANKAR Kapas Ticker Symbol SHANKRKPAS 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 Delivery unit it 1 l t (200 1 lot (200 maunds of 20 kg each i.e. 4 MT) d f 20 k h i 4 MT) Quotation/base value Rs. Per 20 kg Tick size 10 paisa Quality specifications Q li ifi i Raw Cotton C 1. Staple Length Basis : 28.5-29 mm Delivery center y Rajkot and Kadi (Gujarat) at Par j ( j ) Additional Delivery Goods meeting contract specifications may also be delivered at Guntur centers and Akola. The locational Premium/Discounts for Akola and Guntur will be announced before the launch of the contracts. Position limit Member : Maximum of 75,000 MT for all contracts Client : Maximum of 15,000 MT for all contracts 19

20 NYBOT Cotton

Prices of Lint cotton (S 6) Prices of Lint cotton (S 6) 24 000 24,000 22,000 ndy 20 000 20,000 Price per Can 18,000 16 000 16,000 14,000 12,000 12,000 Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sept 2003-04 2004-05 2005-06 2006-07 Source: Cotton Corporation of India 21

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 g p q (currently 19) of cotton traded globally Monthly Average Cotlook A Index 80 70 60 50 40 r r r r y y h l y e y t e e e i s e r r n l r c a b b b u u a p b a r M u m m m J g u u a A o J n u t r M e e e c b A a t v c O O p p e J J o o e e e e F F N N D D S S 2004-05 2005-06 2006-07 2007-08 In US Cents per lb 22

23 Cents per Lb Cents per Lb Cotlook Index A

24 Cents per Lb NYBOT Cotton

Kapas NCDEX April contract Supports – 505, 485 and Resistance – 545, 570 25

NCDEX Cocud May contract 26 Supports – 377, 334 and Resistance – 476, 500