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Cotton prices to remain firm in 2014, says ICRA

Updated: Jan 01, 2014 03:37:01pm
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New Delhi, Jan 1 (KNN) Domestic cotton availability and prices are expected to remain firm  (in 2014) owing to high cotton and cotton yarn exports; while the situations stays highly vulnerable to policy changes in China, an ICRA report has said.
 
“As a result of the tight stock position, ICRA also expects cotton prices in CY14 to remain higher than in CY13. However, they will continue to be driven by policy decisions of the Chinese government, whereby any reduction in import duty on cotton can shift imports in favour of cotton instead of yarn,” according to the rating agency, ICRA’s report on Indian Spinning Industry.
 
“On the contrary, offloading of stock by China at lower prices can lower demand for both Indian cotton and yarn,” the report added.
 
Domestic cotton prices remained stable till February 2013 at Rs 99/kg  , well below minimum support prices of Rs 110/kgs in some states (especially Andhra Pradesh), which led to support price operations including  purchase of 2.3 million bales in Calendar Year (CY) 13 by Indian government agencies.
 
“However, increased domestic cotton demand to meet export demand of yarn and continued cotton exports led to gradual increase in cotton prices to Rs 140/kg by September 2013 and owing to free exports allowed in CY13,” the report said.
 
India’s export of cotton is likely to be 10 million bales in CY13, 3 million bales lower than its exports in CY12 as proportion of cotton yarn exports from India increased significantly during this period. On including cotton bale equivalent of cotton yarn exports, Indian cotton exports would have been 19.5 million bales in CY13, which is similar to CY12 levels and equivalent to 50 per cent of Indian cotton production.
 
According to the report, two consecutive years of high cotton equivalent of export is expected to result in record low levels of cotton stocks in the country and ICRA expects the closing stock/consumption ratio for India to decline to historical lows of 5 per cent for CY13 and CY14, despite an expectation of record cotton production in CY14
 
The low stock position in India is in contrast to the global situation of surpluses and hence Indian cotton trades at international parity.
 
To ensure adequate availability of domestic cotton in CY14 with limited price fluctuations, ICRA expects the cotton exports from India may be calibrated, as was done in the past by way of quotas on exports, added the report. (KNN/SD)

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