Mumbai, Jan. 23 As the northern hemisphere moves away from the peak cotton marketing season, it is becoming increasingly clear that world cotton market faces some upside price risks.
Despite firmness in prices, the weight of crop arrivals has actually contained the pace of price rise till recently.
Going forward, planting intentions in the US and import demand from China are going to determine the price direction.
If anything, there could be a further squeeze in the planted area in the US, thereby, reducing the export surplus.
On the other hand, recent Chinese data show strong gains in cotton imports.
December imports
In December, China's cotton imports were at 2,16,800 tonnes, up 29 per cent year-on-year and the highest level since May 2008.
However, overall imports for 2009 declined by 28 per cent year-on-year to 1.53 million tonnes.
The fall in yearly cotton import was because of lower demand following recession pressures faced by the Chinese textiles industry.
As the leading indicators for OECD and non-member OECD countries are all turning positive, there is optimism on growth prospects.
The pick-up in Chinese import data for December is impressive.
There is now expectation that Chinese imports will edge higher in 2010 because of economic recovery.
This will have implications for world cotton prices in the coming months.
World output
According to the International Cotton Advisory Committee, for 2009-10, world cotton production at 22.2 million tonnes will trail world consumption estimated at 23.8 million tonnes.
Ending stocks will be down sharply to 10.75 million tonnes versus 12.34 million tonnes last year.
Improved Chinese demand and recovery in global economic activity should of course bode well for cotton exporting countries such as India.
Export shipments
Export shipments so far are an estimated 20 lakh bales and for the whole season, aggregate shipments may touch 50 lakh bales.
Firm prices are sure to encourage growers for the next season 2010-11.
Source : Business Line