There are over 60 countries in the world that grow cotton. Of these, the number that produce a significant quantity of 10,000 tonnes and above is about 50. The number of countries that can be deemed to be the leading ones and exert an impact on world cotton production and prices is five.
The details of area and production in these countries, as published by ICAC, are given below:
Although India leads the world in area under cotton, it is relegated to the second rank in production because of its low per hectare yield. It may also be mentioned that the above five countries account for 72 per cent of the world cotton area and 76 per cent of world cotton production.In the case of per hectare yield, the situation is summarized in the following table which gives the yield in the leading 10 countries along with the area and production in each.
A look at the five countries topping the list will reveal that China has not only the fourth highest yield but has also a very large area under cotton, and its contribution to production is also quite substantial.Brazil is the next significant one since it has the fifth highest yield and a significant level of production. Australia, the leading country in the matter of per hectare yield, also has a high level of production. India has the lowest yield among the 10 leading countries.
As regards cotton consumption, the leading countries are listed below:
China is at the top in cotton consumption because it has a very large textile industry and is a leading manufacturer of textiles, both for domestic use and for export. India comes next. It can also boast of having the world’s largest textile industry with a highly prospering decentralized sector, besides the organized sector.
Coming to the internatio
nal trade in cotton, the five leading countries are given below, alongwith the quantity exported by each.
As may be observed, India is the second largest exporter of this fibre. In some years, it takes the leading position in this regard.
The five leading cotton importing countries are listed below, along with the quantity imported by each.
Although China is the world’s highest producer of cotton, it also imports a very large quantity as the Chinese Government has a policy of maintaining a large stock as national reserve for moderating domestic prices. In the case of India, although it has a very large exportable surplus in cotton and is the leading or second highest exporter, it is obliged to import a small quantity of superior long and extra-long staple cotton since production of such high quality cotton in the country is not adequate for meeting the requirements of the domestic industry to spin fine and superfine yarn. Export and import of cotton is now under the Open General Licence (OPL) Scheme, and no specific approval of the Government is required but only registration with the Director-General of Foreign Trade (DGFT) will suffice.
The prices of all cotton varieties had moved up in June. They have now escalated further in July. The average spot rates of five representative varieties during the last three months are given below:
The maximum increase of Rs. 2,531 per candy has been in the case of Bunny. The second highest increase at Rs. 2,487 per candy was in the case of S-6, closely followed by H-4 at Rs. 2,389 per candy. The third in order was J-34 at Rs. 2,332 per candy. The lowest increase of Rs. 2,310 per candy was in the case of DCH-32.
After touching a high in August, cotton prices had remained weak in September and October. There was a marginal increase in November, and the uptrend continued in the case of most varieties in December. The trend was upward in January also in all varieties, excepting DCH-32, the price of which lost some ground. Prices moved up in February and continued to rise in March. There was a reversal in April when prices moved down and the downtrend continued in May. The trend got reversed in June with the prices of all varieties hardening. And in July the prices of all varieties have escalated further.
There are several reasons for the rising trend in July. Both domestic demand and overseas enquiries have been reportedly increasing, triggering the rise in prices in the domestic market. On the other hand, supply was getting reduced with the market arrivals tapering off, while spinners and exporters were active in the market to cover their position. The surge in export demand has caused apprehension among buyers as they were worried that suppliers may tighten further.
Apart from export of raw cotton, reports indicate that there has been a rising demand from the US for Indian textiles with the revival of the American economy. Besides the demand from the US, exporters had reportedly received more orders from Europe. In fact the US and Europe are the major destinations for India’s apparel exports. Further, the competition from Bangladesh faced by the Indian industry has waned due to slow growth of its economy, opening a window of opportunity for the Indian industry. In turn, the increase in demand for Indian apparel has triggered higher demand for raw cotton by the industry. All these factors have put upward pressure on raw cotton, triggering the rise in cotton prices.
A look at the comparative monthly average prices this year and last year reveals that prices have been higher in the case of all varieties this year. The comparative data are given below:
