Are we at peak cotton?

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NEW DELHI, The Economic Times: Indian cotton could touch Rs 2.75 lakh per tonne by October, says the textiles ministry. Wow! That’s some number. It makes cotton more precious than aluminum, crude oil, iron ore, and ten times more valuable than sugar. No other field crop in India comes even close. What this also means is that the new 2011-12 could open at this fantastic price that translates into Rs 1 lakh per candy.

The textile ministry’s latest calculations are straight forward. Going by the snail’s pace of current mandi arrivals, it pegs the season’s output at 31 million bales. Hectic capacity expansion means local mills can now process up to 28 million bales. As 5.5 million bales have been exported, we will eat up this year’s entire output, plus half the bales left unsold from last year. By October 1, India would have 2.4 million bales left. Or enough to last mills just one month.

What traders in New York are willing to pay acts as a natural cap on local Indian markets because no one would be foolish enough to stock cotton at a price higher than that. On ICE futures, New York, traders are paying Rs 68,000 per candy for delivery in March. And they are willing to pay that much right up to July. Prices in our own mandis, therefore, crossed Rs 64,000. Yet a tipping point is close. 

The original article has published on The Economic Times, 14 Feb 2011, click here to read the full article - 


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