Fundamentals of Cotton

Presentedby:
ChowdaReddy
CommoditiesResearchDesk
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
Provides employment to 4-5 million people
Cl ifi d based
Classified
b d on Fibre
Fib length
l th
1. Short staple
2. Medium staple
3. Long and Extra long staple
2

Classificationandpercentageshare
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 to 33.5
28.0
33 5 mm

Extra Long

34 mm & above
Short 3%
Extra
E
t Long
L
2%

Long 51%

Medium
M
di
27%

Medium
M
di
Long
17%
3

Cottonproducts
Cotton

Lint (Fibre)

T til
Textile

Oil (15%)

Seed

C k (83%)
Cake(83%)

SeasonalityofCotton

J
Jan

F b
Feb

M
Mar

A
Apr

M
May

J
Jun

J l
Jul

A
Aug

S
Sep

O t
Oct

N
Nov

D
Dec

China
US
India
Pakistan
Brazil
Uzbekistan

Sowing

Growth Stage

Harvesting

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

IndiaCottonBalancesheet
Quantity in Lakh bales

Particulars
Beginning Stocks
Production
P
d ti
(Lakh bales)
Imports
Total Supply
Exports
T t l Dom.
Total
D
Cons.
C
Ending Stocks
Stock to Use %
Source:USDA

2000
-01

2001
-02

2002
-03

2003
-04

2004
-05

2005
-06

2006
-07

2007
-08

63

48

66

46

54

112

103

94

140

158

136

179

243

244

279

314

20

31

16

10

13

223

236

217

235

310

361

388

413

44

61

78

173

170

170

173

190

214

232

232

48

66

46

54

112

103

94

103

27.67 38.44 26.85 29.48 56.69 41.42 30.75 27.84

Majorproducingstates
j p
g
Cotton Production share of States
Haryana
6%

Others
Oth
7%

Gujarat
38%

MP 7%

Punjab
10%
Andhra Pradesh
13%

Maharashtra
19%

Gujarat

Maharashtra

Andhra Pradesh

Madhya Pradesh

Haryana

Others

Punjab

Domestic consumption
Domesticconsumption
Lakh bales
C
Consumption
ti

00 01
00-01

Mill consumption

149.36 147.00 142.42 150.39

163.98 182.00 194.89 207.00

Small Mill
consumption

10.97

11.70

11.63

13.00

16.57

20.00

21.26

23.00

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

Export

01 02
01-02

02 03
02-03

03 04
03-04

Total disappearance 173.63 172.26 169.67 189.21

04 05
04-05

05 06
05-06

06 07
06-07

07 08
07-08

195.03 217.00 232.03 245.00

44

61

78

204.17 264.00 290.03 310.00

Sources : CAB

Worldproduction
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%)

10

World Cotton Balance sheet

Beginni
ng
Stocks

Productio
n
Imports

Total
Supply

Exports

Ending
Stocks

Stock to
Use %

2000/01
000/0

332

65

114

334

2133

334

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
51.75

2006/07

35

77

156

48

281

48

78

49.52

2007/08

34

78

152

50

281

50

76

47.54
11

Major producing countries

200102

200203

200304

200405

200506

200607

200708

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

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

1141

1264

1132

1220

1563

1507

1563

1523

Country

Total

12

Textiles
Textiles
Textile Fibres

Natural
Fibres

Plant (Cellulose)
Cotton

Animal
(hair.cocoon)

Man made
Fibres

Organic

Inorganic (carbon,
ceramic & glass)

13

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

14

CottonTextiles
Man-made Fibre production has almost doubled during
1990-2005 to 32 million tonnes, while cotton output
i
increased
d by
b 31% tto 25 million
illi tonnes
t
Consumption of Man-made Fibre has increased at an
annual rate of 4.7%
4 7% in global market
market, while cotton rose by
1.8% per annum between 1960 and 2002
Trade quotas abolished in 2005 by developed countries

15

Kapaskhali
Seed separated from cotton is further processed and byproducts 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 (23%)
Cake used as cattle feed and oil used for edible purpose
Demand comes from Gujarat
j
and Rajasthan
j
Most of the oil seed cake consumed domestically

16

DomesticscenarioofKapaskhali
p
(QtyinMilliontonnes)

Year

Crush

Production

Exports
(1000 MT)

Domestic
consumption

2000-01

3.7

1.7

1.7

2001-02

3.8

1.8

1.8

2002-03

3.4

1.6

1.6

2003 04
2003-04

43
4.3

20
2.0

20
2.0

2004-05

5.9

2.8

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

Source:USDA

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NCDEXcontractspecifications
Name of Commodity

V 797 Kapas

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

Delivery center

Surendranagar (Gujarat)

Delivery

Sellers option

MCX contract specifications are similar

ShankarKapascontractspecifications
p
p
Name of Commodity

SHANKAR Kapas

Ticker Symbol

SHANKRKPAS

Basis

Average of spot prices of the following stations

Unit of trading

1 lot (200 maunds of 20 kg each i.e. 4 MT)

D li
Delivery
unit
it

1 llott (200 maunds

Quotation/base value

Rs. Per 20 kg

Tick size

10 paisa

Q li specifications
Quality
ifi i

Raw Cotton
C
1. Staple Length
Basis : 28.5-29 mm

Deliveryy center

Rajkot
j
and Kadi (Gujarat)
( j
) at Par

Additional Delivery
centers

Goods meeting contract specifications may also be delivered at Guntur

Position limit

Member: Maximum of 75,000 MT for all contracts

NYBOTCotton

20

Prices of Lint cotton (S 6)

24 000
24,000

Price per Can

22,000

20 000
20,000

18,000

16 000
16,000

14,000

12,000
Oct

Nov

Dec

Jan

2003-04

Source:CottonCorporationofIndia

Feb

Mar

2004-05

Apr

May

2005-06

Jun

Jul

Aug

Sept

2006-07

21

CotlookIndexA
The COTLOOK A INDEX is representative of the level of offering
prices on the international raw cotton market
It is an average
g of the cheapest
p five q
quotations from a selection
(currently 19) of cotton traded globally
Monthly Average Cotlook A Index
80

70
60

50

2004-05

2005-06

2006-07

Ju
ly

Ju
ne

M
ay

Ap
ri l

h
M
ar
c

Au
gu
st
Se
pt
em
be
r
O
ct
ob
er
N
ov
em
be
r
D
ec
em
be
r
Ja
nu
ar
y
Fe
br
ua
ry

40

2007-08

In US Cents per
22 lb

CotlookIndexA

Cents per Lb

23

NYBOTCotton
Cents per Lb

24

KapasNCDEXAprilcontract

Supports 505, 485 and Resistance 545, 570

25

NCDEXCocudMaycontract

Supports 377, 334 and Resistance 476, 500

26

Factorstobewatchedout
Global cotton output estimated at 152 million bales during 2007-08
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
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
2 5 lakh
bales in December
Current arrivals are around 80000 bales

27

Factorstobewatchedout(contd)
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 output
o tp t
Factors influencing the prices
Production (both domestic and global)
A i l in
i domestic
d
ti markets
k t
Arrivals
Exports from India
Global prices (NYBOT and Cotlook A Index)

28

Priceoutlook
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 cotton prices
Global
i
made
d 10 years high
hi h off 92 cents per Lb
Prices are likely to take some correction in near term
Long term sentiments still remain strong with lower global
output
Cotton prices may touch Rs.24000-25000
Rs 24000-25000 per candy in long
term
Kapas khali prices may touch Rs.1000 per quintal in 44-55
months
29

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