19813248 cotton report

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Cotton Report

Multi Commodity Exchange of India Ltd102 A, Landmark, Suren Road, Chakala, Andheri (East), Mumbai - 400 093 Tel: 02266494000 / 26836016, Fax: 022 66494151 Email - [email protected] www.mcxindia.com

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ContentsNo 1 2 3 4 Chapters Background International Scenario Domestic Scenario Supply Stagnant Yield Production Producing Regions Imports 5 6 7 8 9 10 11 12 13 14 15 Exports Import Duty on cotton Price Seasonality Minimum Support Price Quality Problem in Cotton Andhra Pradesh International Cotton Market Review Domestic CottonMarket Review Why Futures in Cotton Suitability of Cotton Futures Annexure Contract Farming in Cotton Technology Mission on Cotton in 10th Plan Research and De

velopment Statistics 12 13 14 15 20 Page No 2 2 3 4 4 4 4 5 6 7 7 8 8 9 9 9 10 10

Multi Commodity Exchange of India Ltd.

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1. BackgroundIndia is traditionally cotton producing country, being worlds number one in acreage and third in output. Cotton is a very important commercial crop for India. Itsustains the countrys cotton textile industry, which is perhaps the largest segment of organized industries in the country. India earns foreign exchange to thetune of $10-12 billion annually from exports of cotton yarn, thread, fabrics, apparel and made-ups. Cotton provides gainful employment to millions of people in

the country who are engaged in its cultivation, trading, processing, manufacturing, fabricating and marketing. According to Dr. Terry P. Townsend, Executive Director, International Cotton Advisory Committee (ICAC), cotton is one of the mostimportant employment generating industrial crops with about 250 million people directly or indirectly dependent on it for their livelihood. The world consumptionof textile fibres has gone up to some 50 million tones now from 15 million tones in 1960. At present the average per capita annual consumption of textile fibres in the world is about 8 kg of which 3 kg is cotton.

2. International Scenario

As can be observed from the above graph, the world production and consumption ke

ep fluctuating from year to year based on several factors. The annual opening and closing stock of the commodity is also considerable to cushion against succeeding years crop failure. China, US and India are the three largest producers of cotton. However, of them only US is having considerable share in the world exports. India and China both fall short of their domestic requirement and are net importers. Pakistan, Brazil, Turkey and Uzbekistan are the other main producers. Among the consumers China leads the way being followed by India, Pakistan, US andTurkey.


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China has now become a net exporter of cotton from an importer about four yearsback. This is because while in India, both the yield and quality of cotton haveremained low during the past few years, in China and some other countries significant improvements have been made i.e. early adoption of Bt cotton.

3. Domestic ScenarioCOTTON BALANCE SHEET (Quantity in lakh bales of 170 Kgs) Year (Oct - Sept) Suppl

y Opening Stock Production Imports Total Demand Mill Compound Non- Mill CompoundSSI Compound Exports Total Closing Stock 120 8 3.9 131.9 22.75 125 8 1 134 31.75 138.29 9.5 6.5 8 162.29 30.93 150.41 11.86 7.89 7.39 177.55 30.38 143.51 9 6.53.5 162.51 30 149.86 9 6.5 1.01 157.49 36.5 157.86 9 6.5 0.65 174.01 40.5 150 10.9 6.5 0.6 173.5 29 150 12 7.5 2 171.5 28 30.15 121.5 3 154.65 22.75 138 5 165.75 23.52 161.5 0.5 185.52 30.93 176.5 0.5 207.93 30.38 158 4.13 192.51 30 165 7.87 202.87 36.5 156 22.1 214.51 40.5 140 22 202.5 29 154.5 16 199.5 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02

(Source: Cotton Advisory Board)

Despite having the largest area under cotton in the world, India ranks third in

world output of cotton due to its abysmally low average yield of 300 kg againsta world average of 550 kg per hectare. The problem is also compounded by higherproduction costs and poor quality in terms of varietal purity and trash content.Despite adequate output, the country has to import about 22 lakh bales of cotton equivalent to 12 percent of the domestic production due to price and quality considerations. There is a 10 percent import duty on cotton but most of the cotton is imported duty free in the country as it is used for the production of goodsthat are exported. 11% of the cotton is produced in India in 20% area, as indicated in the following table: Particulars Area (in million hectares) 2002-03 Production (in million MT) 2002-03Source: Cotton Corporation of India

World 30.27 19.77

India 7.57 2.30

Indias share 20% 11%

It is the most important raw material for the Rs. 1,50,000 crores textile industry in India. The textile industry is on a recovery path since April 2002 after passing through a crisis in the past 5 years. The textile industry contributes 5percent to the GDP and 14 percent to Indias industrial production. It accounts for about 30 percent of Indias exports. Cotton accounts for more than 75 percent ofthe total fibre that is converted into yarn by the spinning mills in India and58 percent of the total textile fabric materials produced in the country.


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4. SupplyStagnant Yield In India, cotton yields increased significantly in the 1980s and through the first half of 1980s but since 1996 there is no increase in yield. In the past, the increase in cost of production of cotton was partially offset by increase in yield but now with stagnant yield the cost of production is rising. Besides low yield, Indian cotton also suffers from inconsistent quality in terms of length, micronaire and strength. Modem textile machinery, both spinning and we

aving require cotton and yarn of high strength and good micronaire value. Low macronaire cotton is difficult to process cost effectively on modern machinery. Production With not more than a third of the cotton cultivation under irrigation,it is not surprising that cotton output varies considerably from year to year inresponse to the vagaries of weather and pest attacks. In the last ten years thecountrys production has ranged from as low as 146 lakh bales in 2000-01 to 177.90 lakh bales in 1996 - 97.

(Source: Ministry of Agriculture) The area under cotton was 81.22 lakh hectaresin 2000-01 against 58.91 lakh hectares in 1950-51. The average yield of cotton in India went up from 88 kg in 1950-51 to 301 kg per hectare in 2000-01. In India, every year, the output of cotton is estimated by the ministry of agriculture a

nd the Cotton Advisory Board (CAB).

Producing Regions Although cotton is cultivated in almost all the states in thecountry, the 9 states of Punjab, Haryana, Rajasthan, Gujarat, Maharashtra, Madhya Pradesh, Andhra Pradesh, Tamil Nadu and Karnataka account for more than 95 percent of the area under and output.


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(Source : Ministry of Agriculture) Imports of Cotton India imported just 30,000bales of cotton in 1996-97 (Oct-Sept). The imports rose to 4.13 lakh bales in 1997-98, 7.87 lakh bales in 1998-99 and 22.01 lakh bales in 1999-2K. Indias importsof cotton went up from Rs.381 crores in 199899 to Rs.1.254 crores in 1999-2K before declining slightly to Rs.1, 183 crores in 2000-01. India imported about 22lakh bales of cotton in 2000-01 season. Its imports were likely to be about 16-18 lakh bales in the 2001-02 seasons. Despite good domestic crops, India is impor

ting cotton because of quality problems or low world prices particularly for processing into exportable products like yarns and fabrics. In 2000-01, the international price of cotton was high compared to the domestic price. Therefore, mostexport oriented cotton-spinning mills in the country also preferred to use the domestic cotton. In April 2002, however the imported cotton was about 8 percent cheaper than India cotton. Therefore, the mills planned to import cotton. In recent years, Indias imports of cotton from the US have started growing. The importsrose from 21,221 tons in 1998-99 (Aug- Jul) to 48,805 tons in 1999-2K and 1,28,065 tons in Aug01-Jan02. The US is expected to have exported cotton worth $110 million to India in 2001 against $60 million in 2000. In the cotton-marketing year 2001-02 (August-July), the US cotton traders were expected to export 12-13 lakh bales from a total of 23 lakh bales India was expected to import. In 2001-02 (Aug

- Jul), the price of good quality US cotton was lower in the world market compared to that from its competitors in Australia, Brazil, Uruguay, CIS nations. Turkey and West African countries. The Indian mills want good quality cotton (cleanand of uniform staple length), particularly for converting into products for exports throughout the year, as they do not have resources to purchase their annualneeds in one go. The US cooperatives were offering cotton with long credit period. In 2001-02, Indias 60-70 percent imports from the US were long staple cotton.


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5. Exports of CottonIn July 2001, the union government removed all curbs on cotton exports. The quota system was done away with and the exporters are now not required to obtain anycertificate from the Textile Commissioner on the registration, allocation, quality and quantity of export. According to the Planning Commission, India is not likely tomake any significant growth in its exports of cotton in the next 2-3 years (2002-05 in view of low world prices that are expected to prevail notwithstan

ding removal of all restrictions on cotton exports from India since July 2001).Indias imports of cotton are also expected to remain high unless steps are takento increase the production of 27-30 mm staple cotton under Technology Mission onCotton. India is expected to have imported 22 lakh bales of cotton in 1999-2K and 16 lakh bales in 2000-01. Indias exports of cotton fell from 16.82 lakh balesin 1996-97 to 3.5 lakh bales in 1997-98. INDIA

S EXPORTS OF COTTON (Quantity, M.T; Value, Rs. Crores) Description Year (Apr Mar) 1998-99 QTYA. Bengal Desi B. Indian cotton 13,492

1999-2000 QTY8,067

2000-01 QTY9,165

2001-02 VAL43.66

VAL64.7

VAL40.58

QTY

4,254

VAL20.39

Staple< 20.5 mm Staple> 20.5 mm but < 24.5mm Staple> 24.5 mm but < 28.0mm Staple> 28.0 mm but < 34.5 mm Staple > 34.5 mm C. Foreign cotton of all staple Total(Source : DGCIS

3,697

21.54

188

0.84

282

1.29

867

4.44

2,016

9.96

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149

0.8

2,120

11.46

-

-

12,746

61.15

1,476

6.2

850

3.46

355

1.59

67 193

0.53 1.17

30 15

0.2 0.09

245 49

1.29 0.48

-

-

32,211

159.05

9,926

48.7

12,710

61.64

61 5,538

0.27 26.68

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6. Import duty on CottonIndias Exports of Readymade Garments (quantity, Million Pieces, Value, US$ Million)

Year 1997-98 1998-99 1999-2K 2000-01

Quantity 1,314.2 1,390.8 1,440.6 1,264.3

Value 4,910.3 5,269.4 5,524.5 4,542.9

In 2001, there was a 5.5 per cent import duty on cotton (5 per cent basis + 10 percent additional on basic). In December 2001, the union government was contemplating an increase in this duty. While the cotton growers were demanding that theduty should be raised to 25 percent, the government had also to consider the impact of duty increase on fabric manufacture. The Indian Cotton Mills Federation (ICMF) was vehemently opposing the hike of import duty. According to ICMF, Indiasexports of cotton yarn, fabrics and other textile materials were already dwindling in 2001-02 and any hike in import duty would worsen the situation. As such there was little difference in the price of indigenous cotton and imported cotton

after taking into the account the incidence of import duty, freight, insurance,etc. on imported cotton. The main incentive for the importer was, however, the imported cotton is clean and of uniform quality. There was also a shortage of long staple cotton in the country. Further the import of cotton is permitted only by yarn exporters under advance licencing. Manufacturers of fabric, garments andmade-ups are not allowed to avail this facility. On January 9, 2002, the union government raised the import duty on cotton (not carded/combed) to 10 percent after the domestic cotton prices fell by 20-30 per cent during Sep-Dec 2001. The WayAhead The demand for cotton is expected to rise to 220 lakh bales by the end ofthe Tenth Plan. It is proposed to raise the output of cotton in the country to223 lakh bales by 2006-07. Although the average yield of cotton in the country is showing some improvement, the area under cotton is stagnant. According to somescientists there is some scope for increasing the area under rice follow cotton

to 1-lakh hectares from 15,000 hectares at present. Further cotton can also beinter-cropped with groundnut and pulses. The use of Bt cottonseeds is also likely to help in raising the production to adequate levels. The other view is to improve the yield of cotton from 300kg to 400kg per hectare to achieve a yield of 220 lakh bales by 2005. This can perhaps be done by increasing the irrigated cotton area, bringing more area under hybrid cotton and encouraging the cultivationof drought-resistant desi cotton. The irrigated cotton area can be increased byinstalling drip irrigation system in central and southern states.

7. Price SeasonalityIn India cotton is sown during March to September and harvested during Septemberto April. The peak marketing season for the crop is during November to March. At present about 40 percent of the 9 million hectares of total area under cottonin India is under hybrid cotton. In India more than 80 percent of the cotton produced is sold out by March 31 every year and the price starts firming up from April and starts easing only in September when the new crop starts arriving in themarket.


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8. Minimum Support PriceIn September2000 the Cabinet Committee on Economics Affairs decided to increase the minimum support price (MSP) of F-414/H-777/J-34 varieties of cotton In earlySeptember 2002, the CCEA decided to maintain the MSP of cotton for 2002-03 at the same level as in 200102. But on September 30,2002, the government decided to provide a drought relied of Rs.20 per quintal In 2001-02 (Oct.-Sept.), the CCI and the Maharashtra government are expected to have spent about Rs,1,000 crores in

the procurement of cotton from farmers. In 2001-02, the CCI procured 8.51 lakhbales of cotton at a cost of Rs.778.92 crores to prevent distress sale of the crop by the farmers. In the coming years, this expenditures is expected to rise further as lower world prices would require higher subsidies. At present the import duty on cotton in India is only 10 percent as against a WTO bound rate of 40 to 80 percent. The import duty on cotton, however, cannot be raised as in such acase Indias exports of cotton yarn and cotton textiles will be affected badly. Inrecent years, with the imports and exports of cotton being permitted under OGL,and the MSP always going up every year, the output of cotton in the country does not affect its price much. Even when the production is high, the domestic price remains high because of a high MSP. If the production is low, the domestic price cannot rise much above MSP as the import option for cotton is always open to

the industry. According to the International Cotton Advisory Committee, for increasing the output of cotton and growers income the yield of cotton in India should be raised and support prices should be based on yield rather than cost of production. In India, until recently, the support prices were almost at par with the international prices but if the prices are kept on being raised from year to year, the support price will go above the global price. This will neither benefitthe farmers nor the industry.

9. Quality Problem in CottonOne of the problems faced by the cotton spinning mills in the country is they are not able to procure bales of cotton of uniform variety in bulk purchases as anumber of varieties of seeds are used by farmers which yield cotton of varying staple length, micronaire, strength and other properties. A 5-member panel appoin

ted by the Cotton Advisory Board has suggested that only 30 percent or 40-45 varieties of cottonseeds, of the 150 plus certified varieties that are in circulation in the country need to be retained to get good quality cotton. The other varieties, which have been officially released but have lost their relevance with time, should be denotified by the government. The panel, however, has not taken into the account the other 175 to 200 different varieties of cottonseeds for sowing produced by the private companies in the country and being used by the farmers, many of which are officially not certified. Even in the case of varieties developed by the public research institutions, it is a well-known fact that only about a quarter of them account for the 95 percent of the cotton produced from suchvarieties. In other words the 100 different varieties of seeds the panel wantsto be denotified are in fact not in use in any significant quantities in the country, though their official denotification is still necessary. In this matter, the concept of one variety in one village is more relevant.


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10. Andhra PradeshCotton is grown in Andhra Pradesh in some 9 lakh hectares in Adilabad, Mahbubnagar, Guntur, Warrangal and Karimnagar. The output of cotton in Andhra Pradesh hasbeen estimated at about 25-27 lakh bales in 2001-02 same as in 2000-01. DuringOct. 01-Jan 02, about 10 farmers in Andhra Pradesh committed suicide due to fall in the price of cotton. The price of cotton fell from Rs.1,890-1,900 per quintalin October 2001 to about Rs.1,600-1,650 in end-December 2001. The fall was attri

buted to lack of demand from ginners, spinners, weavers and ready-made garment exporters in the entire chain. There was a slump in demand for cloth and garmentsboth in the domestic and export markets.

11. International Cotton Market ReviewThe world price of cotton started declining from a level of 66 cents/lb on 31 December 2000 and fell to 35 cents/lb on st 31 October 2001(the lowest since November 3,1972). In November 2001, however, the price rose and went up to 43 cents/lb on November 30,2001. The price was still 41 percent lower than the long-term average of 72 cents. Despite better demand supply balance in 2001-02, the price did not show any sharp rise as supplies were sufficient to meet demand. The ICAChad earlier projected average cotton price of 46 cents/lb in 2001-02 and 49 cent

s/lb IN 2002-03. The world price of cotton was unlikely to touch 72 cents/lb even in the next two years. The world output of cotton was expected to remain highwith many farmers taking up the cultivation of Bt.cotton, which has higher resistance to pests and gives better yield. The average price rose to 48 cent in June2002 and was expected to go further up in view of rains affecting the 2002-03 cotton crops in China and the delay in cotton sowing in the US, which would to delay the arrival of new crop by one month. According to Dr. Terry Townsend, the Executive Director, ICAC the expanding production in low-cost producing areas, advances in biotechnology and international farm supports would keep the world output of cotton high in the coming years and the world prices under check. The lowproduction costs would sustain US national average output as about 4 million tones over the next six years. At the same time, cotton output in low cost producing countries, Brazil and Turkey, was also going up. The cultivation of GM cotton

in India and China would reduce its production cost in these countries. As a result, in this decade, cotton prices may hover around 50 to 60 cents per pound formost of the time. The share of GM cotton in total cotton output may go up from30 percent at present to 50 percent in 2005.st

12. Domestic Cotton Market ReviewIn November 2001, the domestic prices of various grades of cotton were lower byabout Rs.2,500 to Rs.5,000 compared to those in November 2000. However, this wasso due to higher prices in November 2001 because of a lower domestic output in2000-01. The price of cotton in the Indian market started rising since the middle of May 2002 because of paucity of stocks and also rise in its international price. In the first three months of 2002-03 (April-June), the domestic price of cotton went up by 12-15 per cent and the global prices by 17-18 per cent mainly due to lower end of the season stocks and also to some extent due to lower outputanticipated in 2002-03. The cotton prices were ruling low in past two years. This had prompted farmers to shift to other more remunerative crops. The market condition of yarn as well as fabrics began to improve and their exports also beganto pick up. By the middle of June 2002, the price of different varieties of cotton had gone up by Rs. 1,000 to Rs.1,500 per candy. The price of Shankar-4 went up from Rs. 17,000 to Rs. 18,000 per candy. The international cotton dealers werenot willing to sell cotton to Indian mills at less than 43 cents per pound as quality cotton was not available and it was nearing the end of the season. Page 8


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13.

Why futures in cotton?

Cotton producers, merchants and stockists face risk of large value losses on their production, purchases and stocks from fall in prices. Similarly the exportersand spinners are exposed to heavy risks from adverse price increases on their o

verseas or domestic sale commitments of fibre or yarn for delivery at a later date. Futures trading in cotton, is likely to give an effective tool in their handto hedge their price risk. Introduction of cotton futures is also likely to improve the cotton quality (by improving varietal purity and reduce trash content)to comply with the quality specifications of the underlying as traded in the exchange.

14. Suitability of Cotton FuturesFluctuating and uncertain supply The world cotton output keeps fluctuating yearto year based on several factors, such as Rains affecting the Chinese crop Latesowing in US Increased production in low cost producing countries like Brazil and Turkey Advancement in biotechnology Introduction of Bt cotton in India and Chi

na which are pest resistant and with higher yield The domestic cotton supply hastwo parts indigenous production and imports. India imports equivalent of 12 % of its cotton production due to price and quality considerations. The domestic production is influenced by several uncertain factors, such as Stagnant acreage against introduction of Bt cotton with higher yields. Poor rainfall leading to drought and moisture stress resulting in lower crop Stock with the procurement agencies Pest attacks by American Boll Worm in producing states like Haryana and Rajasthan Fluctuating acreage in various states due to crop shifting Intercroppingwith crops like groundnut and pulses Area under irrigated cotton, hybrid cottonand drought resistant desi cotton Plans to install drip irrigation system in central and southern states MSP on cotton crop in certain varieties with sometimesadditional drought relief Procuring agencies like the Maharashtra State Co-operative Cotton Growers Marketing Federation keep cotton stocks and also sells at di

scount. Some private players also involve in cotton procurement. Carry of stocksof major producing states also influence supply. In India several agencies periodically gives estimates of the countrys cotton crop apart from industry expectations, such as Ministry of Agriculture All India Cotton Traders Association Central Institute of Cotton Research, Coimbatore Cotton Advisory Board


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The main factors influencing cotton imports are Price differential between Indian and imported cotton (landed cost). Local cost and landed cost of imported cotton with 10 % import duty, fright and insurance keep fluctuating and accordinglythe domestic mills go for procurement. The domestic mills are motivated to go for imported cotton when they dont find adequate supply of pest free, good qualitycotton in the domestic market. Due to seasonal non-availability sometimes the mills are required to go for imported cotton. As when Bengal desi from North arriv

e in September and American cotton from Western India in November leading to tight supply situation for the textile mills, they look for import option. Fluctuating and uncertain demand The major cotton consuming segments are the mills and the small-scale industry. Their main considerations are for quality and price ofcotton. However, falling yield leading to high cost of production and falling quality (varietal purity and trash content) are driving the domestic consumers togo for imported cotton. Price Variation The below tables, shows the high instability in cotton prices in Indian market, during the past several years. This makes an ideal case for futures trading, so as to enable the cotton traders, importers and processors to hedge their price risk. Occurrence in percentage terms in Mumbai Month on month variation in percentage terms Average prices of J-34 (S.G.)Cotton between 1995-96 to 2001-02 5& above 34

02 38

2-5 29

Maximum Price Variation in Percentage Terms Maximum Variation Monthly Year Percentage 12.4 21

Average prices of J-34 (S.G.) Cotton between 1995-96 to 2001-02 Source: East India Cotton Association Ltd, Mumbai


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Annexure - 1Contract Farming in Cotton In 2002, the union government had plans to introducethe concept of contract farming on a experimental basis in the two states of Andhra Pradesh and Gujarat. The system was expected to be similar to the one beingadopted for sugar by most sugar mills in the country. In case of cotton, the ginning mills were expected to provide quality seeds and other inputs to the farmers in their catchment areas and buy cotton from them at attractive price. The aim

was to produce quality cotton (clean,of uniform staple length and derived froma singly variety of seed) which could fetch a better price also for the farmers.Indian farmers spent about Rs.3,800 crores on pesticides annually. Of this about Rs.2,100 crores is spent on pesticides for cotton alone. Despite this more than 30 percent of the crop is lost almost every year to pest and diseases. Moreover, the export oriented industry in India wants cleaner cotton and cotton of uniform physical properties to meet specific demand of importers. Contaminated cotton is costlier to clean and also gives poorer yield, as during the cleaning operation a high proportion of good quality fibre is also lost along with the contaminants and bad fibres. The biggest need today is to improve the yield of cotton,cultivated specific seeds in specific regions for uniform quality and improve handling of cotton to reduce contamination. In April 2002, the Indian Cotton Mills

Federation was demanding that the government to come out with the modalities ofcontract farming in cotton at the earliest so that the mills may initiate stepsand adequate supply of quality cotton is available to them from the 2002 cottoncrop. An organic linkage between the mills and farmers can help in achieving substantial improvements in yield and reduction in cost of production, more so inthe wake of the government approving the cultivation of Bt cotton. Some of the proactive spinning and composite mills could go for contract farming in specificqualities of cotton (i.e. extra long staple) in specific areas. For the past several years, the CCI has been running a Village Adoption Scheme under which it adopts a village, supplies all inputs to tall the interested cotton farmers of thevillage, disseminates technologies for improving the yields and quality of cotton to them and after harvesting purchases this cotton from the interested farmersat market rates. In 2002, the CCI was expected to take up integrated farming of

cotton in select regions of Andhra Pradesh, Gujarat and Madhya Pradesh on an experimental basis. It was proposed to take up the cultivation of Bunny/Mallika hybrid in the Adilabad district of Andhra Pradesh. Bunny also called NCS-15 is a highly yielding long staple hybrid developed by Nuziveedu Seeds. The farmers in this district were to be supplied quality seeds, fertilizers and pesticides and given technical assistance also in cultivating specific quality cotton which wasto be purchased by CCI or a user mill with which the CCI or a farmer may have ean agreement.


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Annexure - 2Technology Mission on Cotton in the Tenth Plan The Technology Mission on Cotton isbeing continued in the Tenth Plan period. The union textile ministry has finalized Tenth Plan proposals for Mini Mission III and IV. Under Mini Mission III, itis proposed to set up or improvised 200 markets yards at the rate of 40 marketyards per year. The TMC assistance will be limited to 60 percent of the projectcost, same as during the Ninth Plan period, subject to ceilings of Rs.105 lakh f

or improvising of existing market yards and Rs.150 lakhs for setting up of new market yards. By the end of the Tenth Plan period, there would be 250 modern market yards functioning in the country, which will be adequate for handling about 80 percent of the cotton produced in the country. In May 2002, the Mini Mission III in Gujarat was progressing very well. About 25 market yards had been taken upfor development and up gradation located at Amreli, Bodeli, Visnagar, Mahua, Savarkundla, Rajula, Pavijetpur, Limdi, Jamjodhpur, Bharauchpalej, Anjar, Visavadar, Sidhpur, Morbi, Gondal, Botad, Porbander, Kadi, Dhabol, Dhandhuka, Vijapur, Kukarwada, Bavla and Unava etc. The work involves construction of new and repairing existing buildings and buying new equipment wherever necessary. In the Mini Mission IV, it is proposed to modernize or set up 450 new ginning and pressing (G&P) mills for cotton. The TMC gives financial assistance of 25 percent subject t

o a maximum of Rs 20 lakhs per G&P mill. For buying a new baling press, the 450G&P mills gets an extra assistance of Rs.7 lakhs is also given. Under Mission II, it is proposed to spend Rs.300 crores on improving cotton technology and cotton development in the Tenth Plan. The ministry of agriculture is exploring the possibilities of involving NGOs,t he state cooperative bodies/federations, etc incotton development programme by funding them. It is proposed to increase the quality and output of cotton seeds and increase the ratio of varietal: hybrid seedsfrom 60:40 to 50:50 provide a sum of Rs.1 crore to ICAR institutions and statefarm universities to support the breeder seed programme: and to take an insecticide resistance management programme in 80 cotton districts in the country duringthe Tenth Plan period. According to a review, the Mini-Missions III and IV under the Technology Mission on Cotton (TMC) have done some good work in strengthening the marketing infrastructure and improving the quality at the processing stag

e but the performance of the mini-missions I and II which cover production planning and pre-harvest practices has been far from satisfactory. The government haseven failed to de-notify the 100 odds varieties of cotton that cause varietal impurity.


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Annexure 3Research and Development In cotton, India is the only country in the world, which has developed and cultivated hybrid cotton commercially. Indian scientists have developed a long-staple premier hybrid cotton H4 and extra-long staple interspecific Varalaxmi and DCH 32. Suvin gives the finest quality cotton with spinningperformance of 120s counts. It is comparable in quality with the Giza 45,the best quality Eqyptian cotton. Some new varieties developed which are early maturin

g hybrids are: Fateh, Dhanlaxmi and Rajhans. These hybrids are suitable for cultivation in Punjab, Haryana and Rajasthan in the northwest region. Other hybridsreleased are: Om Shankar LH4144 and AAH 1 for the north zone: PKV Hy 3, PKV Hy4and JK Hy2 for the central zone: and Surya, Sruthi, DHB 195 and DHB 11 for the south zone. An NGO based in Pune, Appropriate Rural Technology Institute (ARTI),Phaltan has suggested that the farmers should plant the seeds of hybrid cotton in plastic bags and cultivate them in these bags for two months. (May and June) before planting the saplings so produced, in July, in the fields to protect themfrom severe damage from American bollworm. The NGO is reported to have been using this technique for the last three years in Marathwada and Vidharba regions andclaims that a yield of 1,000 kg cotton per hectare can be obtained by followingthis method. It had demonstrated this technique in fields of more than 30 group

s with each group comprising of 15 to 20 farmers. The Central Institute of Cotton Research, Coimbatore has developed a medium staple cotton variety, Sumangala,which is tolerant to sucking pest and bollworm attack. Its open canopy attractsless pests and diseases. It can be planted in closer now spacing in north as well as south zones and gives a yield of 25 quintal per hectare under irrigated conditions and 15 quintals in rainfed conditions. It is an early maturing variety maturing in 150-160 days. It can be used as parent to produce hybrids. The SIMA Cotton Development and Research Association has appealed for a need to do maintenance breeding of cotton hybrid variety like MCU-5, LRA-5166, MCU-7 and DCH-32 which currently meet the textile industrys requirement in terms of fibre quality parameters, before long so that their original fibre qualities are retained year after year. Now fibre quality is of immense importance and research efforts should be directed towards development of such new seeds in which these parameters ar

e maintained or improved. The development of varieties which give higher yield at the expense of quality parameters will only promote varietal mixing and quality deterioration.


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Annexure 4Statistics

World Supply and Consumption of Cotton (Million M.T) Year 1994 95 1995 96 1996 97 1997 98 1998 99 1999 00 2000 01 2001 02* 2002 03** SupplyOpening Stock Production Imports Opening Stock

ConsumptionProduction Imports

26.28 28.3 33.76 38.18 43.49 45.13 45.3 42.7 46.84

85.54 92.38 89.43 91.66 84.72 87.36 88.74 98.06 88.57

30.84 27.63 29.18 26.39 25.23 28.41 26.7 29.44 30.9

84.69 86.88 88.21 88.51 85.13 91.91 92.01 94.4 96.71

28.48 27.52 26.9 26.64 23.69 27.31 26.61 29.09 30.6

29.29 33.57 37.03 40.78 44.78 41.48 42.7 46.84 39.16

*Estimated / ** Projected

Cotton Production, Supply and Distribution by country in MY 2003/04 in 1000 480lb balesBeg. Stocks Prod. Imports Total Supply Dom Use Loss * Exports Ending Stocks

Brazil China; P R India Indonesia Mexico Pakistan Thailand Turkey USA UzbekistanZimbabwe World

2915 9008 3338 376 941 2436 607 1259 5500 943 121 37619

4250 27000 12000 37 300 8500 67 4200 17104 4500 500 95375

300 3000 1700 2300 1750 900 1950 2400 50 5 0 30458

7465 39008 17038 2713 2991 11836 2624 7859 22654 5448 621 163452

3700 30200 13500 2300 2200 9400 2100 6450 6600 1300 130 99161

-100 0 0 50 25 25 25 0 -46 0 15 -11

1000 250 50 20 100 100 5 200 11800 3300 325 30010

2865 8558 3488 343 666 2311 494 1209 4300 848 151 34292


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Country-wise Output of Cotton in 2001 - 02 (Area-Lakh Ha; Output-Million 480-lbBales; Yield-Kg/Ha)

Country China USA India Pakistan Uzbekistan Turkey Brazil Others TOTAL(Source : USDA)

Area 46 58.28 86.5 30 14.3 7.3 9.4 89.69 341.47

Output 22,000 19,200 12,300 8,300 4,600 3,800 4,200 20,231 94.631

Yield 1,041 717 602 700 1,133 973 491 603

World Cotton Scenario (in million tons) Description Production Consumption Exports Ending Stocks Cotlook A Index (cents/lb)* Projected Source: ICAC, October 2002

2000-01 19.408 19.762 5. 750 9.274 57. 20

2001-02 21. 510 20.173 6.487 10.206 41. 80

2002-03* 19. 270 20.71 6.45 8.76 54. 00


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All India Area Output and Yield of Cotton(Area, Lakh Hec: Output, Lakh bales: Yield, Kg/Hectare)

Year 1950 51 1960 61 1970 71 1980 81 1985 86 1990 91 1991 92 1992 93 19934 95 1995 96 1996 97 1997 98 1998 99 1999 00 2000 01 2001 02 2002 03*

Area 58.82 76.10 76.05 78.23 75.33 74.40 76.61 75.42 73.21 78.71 90.35 91.21 88.

68 93.42 87.10 85.76 87.50 67.60

Output 30.44 56.04 47.63 70.10 87.27 98.42 97.14 114.03 107.41 118.88 128.61 142.31 108.51 122.87 115.30 96.51 100.90 89.40

Yield 88 125 106 152 197 225 216 257 249 257 242 265 208 224 225 191 208 238

*Projected (Source: Ministry of Agriculture)


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State-wise Area, Output and Yield of Cotton (Area in lakh hectares; Output in bales;: Yield in kg/hectare)

StateArea A.P Gujarat Haryana Karnataka M.P. Maharashtra Punjab Rajasthan Tamil Nadu8.98 14.79 6.38 5.18 5.17 31.39 7.27 6.45 2.48

1997-98Output 13 27.58 11.29 9.85 9.32 17.53 9.41 8.67 4.02 Yield 246 317 301 323 306 95 220 229 276 246 A 12.81 16.59 5.82 6.37 4.97 31.99 5.62 6.44 2.19 0.62

1998-99O 15.22 39.03 8.73 9.77 4.29 26.19 5.95 8.72 4.06 0.91 Y 202 400 255 261 147 139180 230 316 250 A

1999-2000O 15.95 20.86 13.09 7.6 4.57 30.99 9.5 9.84 2.58 1.16 Y 261 230 408 239 148 162340 287 265 270 A 10.22 16.15 5.55 5.6 5.06 30.77 4.74 5.1 1.94 0.63

2000-01O 16.63 11.61 13.83 9.8 2.38 18.03 11.99 8.05 3.25 0.94 Y 277 121 424 298 80 100430 268 285 254

10.39 15.39 5.46 5.4 5.25 32.54 4.75 5.83 1.85 0.73

Others 0.54 7.8 Source: Ministry of Agriculture)


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Indias Country-wise Imports of Cotton(Quantity in, M.T; Value in Rs. crores)

Country

1998-99QTY VAL

1999-2000QTY VAL

2000-01QTY VAL

2001-02QTY VAL

Argentina Australia Belgium Benin Brazil Burkina Faso Cameroon China Taipei China, PRP Czech Rep Egypt Ethiopia France Germany Ghana Greece Guinea Guinea Bibu I

ran Israel Italy Ivory Coast Japan Kenya Kuwait Latvia Malagasy Malaysia Mali Myanmar Mozambique Nigeria

253 15,595 122 2,179 7,324 180 46 7,324 156 639 21 327 774 40 976 2,146 153 353255

1,36 99.81 1.05 13.78 74.31 1,18 0.26 74.31 1.11 4.89 0.12 1.75 6.81 0.47 6.28 13.51 0.83 2.33 1.25

1,286 18,171 5,362 14,501 9,919 5,889 1,090 7,268 584 7,908 646 454 3,254 4,884399 5,609 144 18,532 444 711 876 7,318 7,267 1,442 5,276 751

5,67 102.04 29.11 84.37 55.24 28.12 5.44 44.58 3.91 77.73 3.46 2.54 15.46 25.79

1.79 29.91 0.88 98.06 2.52 3.67 4.97 35 37.09 8.01 25.3 3.58

176 29,382 713 24,286 7,733 3,188 248 10,257 8,827 779 655 763 4,697 1,745 507 1,980 621 90 300 28,775 14 63 456 5,476 11,477 502 3,337 1,224

0.92 179.41 4.83 129.93 42.96 15.53 1.05 58.53 68.87 3.74 2.36 5.08 24.29 9.56 3.32 10.97 3.19 0.5 1.49 153.03 0.1 0.38 4.48 29.05 50.8 2.94 16.93 6.9

10,207 42,900 1,025 25,745 21,175 9,112 6,760 202 740 11,652 1,891 969 386 9,7171,831 1,799 480 14,081 478 46 69 878 1,631 946 2,428 8,498

46.16 255.78 6.63 162.01 97.53 57.65 38.91 1.05 5.45 155.51 11 5.69 2.74 47.53 104.18 10.39 3.41 81.92 2.23 0.44 0.38 4.78 9.08 5.25 13.25 46.71 Page 18


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Pakistan Russia Saudi Arabia Senegal Singapore South Africa Sudan Switzerland Syria Tanzania Togo Turkey Turkmenistan Uganda UAE UK USA Uzbekistan Yemen ZambiaZimbabwe

334 1,153 151 1,082 1,627 5,712 632 366 57 4,184 144 2,123 3,316 945 160 302

2.3 6.37 1.05 8.25 10.4 34.01 4 2.29 0.37 21.26 0.86 13.21 21.39 5.2 1.47 1.96

1,827 13,439 406 969 646 19,113 1,341 1,391 1,802 5,081 5,037 17,039 172 682 1,265 701 12,831 12,145 57 1,307 342 2,30,626

7.81 66.43 2.14 4.98 3.36 101.71 9.37 6.75 8.65 25.23 29.67 83.3 0.8 4.95 6.07 3.99 67.23 51.97 0.43 6.48 1.86 1,244.18

126 8,752 209 1.014 102 6,536 3,115 622 737 3,134 5,044 1,375 399 1,155 1,755 109 13,889 10,976 389 747 25 2,10,589

0.97 43.11 1.35 5.73 0.7 35.1 21.64 3.84 4.97 19.15 28.04 8.5 3.3 5.82 8.49 0.9290.57 45.31 3.2 4.22 0.17 1,177.66

560 279 1,591 3,996 1,486 1,007 3,597 6,446 2,508 863 655 425 1,473 674 1,41,16713,122 83 250 1,374 3,83,964

3.81 1.52 9.57 26.24 12.45 5.36 19.51 36.3 15.22 4.08 3.73 2.99 4.58 3.45 644.660.23 0.48 1.36 8.01 2,042.36

Total* 55,685 376.27 *Including others (Source : DGCIS)

Disclaimer This document is for information purpose only. Certain information herein has been acquired from various external sources believed to be reliable. While we have taken reasonable care during compilation of this document, we assumeno responsibility for any error or discrepancy in the information herein. You m

ust make appropriate judgement without any prejudice or compulsion. Copyright All rights reserved. No part of the newsletter can be reproduced or copied in anyform by any means without the prior permission of Multi Commodity Exchange of India Ltd. Contact Us Multi Commodity Exchange of India Ltd. st 1 Floor, Malkani Chambers, Off Nehru Road, Vile Parle (East) Mumbai 400099 Tel: 91-22-26164146 Fax: 91-22-26118195 Email: [email protected] Website: www.mcxindia.com Multi Commodity Exchange of India Ltd. Page 19

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