Cotton inventory to dip to 35L bales this season

AHMEDABAD: The minimum balance stock of cotton will drop to 35 lakh bales in the current crop season, putting price pressure on domestic mills that pay `50,000 per candy (a candy weighs 356 kg). The ending stock that has already come down to 44.5 lakh bales (each of 170 kg), way below the mandated 50 lakh bales, would further fall owing to late crop arrivals and possible exports, a senior textile ministry official has indicated.
“There is no bloody stock (cotton) in the market,” said a ministry official privy to the sector. The cotton-dependant $62-billion Indian textile and clothing sector will have 329 lakh bales of crop this season. Of that, 58.5 lakh bales have already been exported while the ending stock needed to maintain a healthy balance, has come down to 44.5 lakh bales. “That might eventually fall to 35 lakh bales,” the official said.
Cotton supplies have not kept up with expectations. So far, 162 lakh bales have arrived in the market. Although the supplies are better than last crop year when 152 lakh bales had arrived by this time, the consumption by Indian mills has gone up significantly. Mills now require about 25 lakh bales of cotton per month against 20-23 lakh bales about a year ago.
“Prices rule high at `50,000 per candy because of the shortage of the crop,” textiles secretary Rita Menon told ET. “The Cotton Advisory Board’s (CAB) estimate of an ending stock of 44.5 lakh bales is generous. We need a minimum stock balance to last two and half a months which make it 60 lakh bales.
The textile ministry is adamant that a balance of 55 lakh bales must be maintained as an ending stock. But, with the Directorate General of Foreign Trade issuing fresh licences to export 19 lakh bales, the exports have exceeded 58 lakh bales, sqeezing the ending stock,” she added.
Prices have jumped 40% in one week ever since the market is speculating a shortage in supply for local consumption owing to exports. With bilateral pressures mounting from Pakistan and Bangladesh, market is abuzz with rumours that the Indian government is allowing further export of cotton to the neighbourhood.
“A majority of over 39 lakh bales that were registered for exports with the textiles commissioner office wereshipped to China, Bangladesh and Pakistan,” textile commissioner and CAB chairperson AB Joshi said.

(Source: http://economictimes.indiatimes.com/markets/commodities/cotton-inventory-to-dip-to-35l-bales-this-season/articleshow/7322943.cms)