Required Report - Public distribution

**Date:** 11/29/2007

**GAIN Report Number:** IN7111

IN7111

**India**

**Cotton and Products**

**Quarterly Update - December**

**2007**

**Approved by:**

![](media/image1.wmf)Holly Higgins

U.S. Embassy

**Prepared by:**

Santosh Kr. Singh

**Report Highlights:**

Post's MY 2007/08 cotton production forecast is raised marginally higher
to 23.9 million bales on improved yield prospects in central/southern
India. Consumption is revised lower to 19.0 million bales on poor export
demand for cotton textiles. Exports are revised higher to 5.1 million
bales on strong international cotton prices.

Includes PSD Changes: Yes

Includes Trade Matrix: No

Quarterly Report

New Delhi \[IN1\]

\[IN\]

Table of Contents

[SECTION I: SITUATION AND OUTLOOK 3](#section-i-situation-and-outlook)

[Table 1: Commodity, Cotton (480 lb bales), PSD
3](#table-1-commodity-cotton-480-lb-bales-psd)

[MY 2007/08 Record Production Raised Marginally
3](#my-200708-record-production-raised-marginally)

[Prices Firm on Strong Export Demand
4](#prices-firm-on-strong-export-demand)

[Consumption Lowered on Depressed Demand
4](#consumption-lowered-on-depressed-demand)

[Exports Prospects Improve on Strong International Prices
4](#exports-prospects-improve-on-strong-international-prices)

[SECTION II: Statistical Tables 5](#section-ii-statistical-tables)

[Table 2: Area, Production & Yield of Cotton in Major States
5](#table-2-area-production-yield-of-cotton-in-major-states)

[Table 3: Month-end Prices of Popular Varieties
6](#table-3-month-end-prices-of-popular-varieties)

[Table 4: Cotton Consumption by Mills and Small Sector Units by Month
7](#table-4-cotton-consumption-by-mills-and-small-sector-units-by-month)

# SECTION I: SITUATION AND OUTLOOK

## Table 1: Commodity, Cotton (480 lb bales), PSD

# 

<table>
<colgroup>
<col style="width: 19%" />
<col style="width: 7%" />
<col style="width: 9%" />
<col style="width: 9%" />
<col style="width: 7%" />
<col style="width: 9%" />
<col style="width: 9%" />
<col style="width: 8%" />
<col style="width: 9%" />
<col style="width: 9%" />
</colgroup>
<tbody>
<tr class="odd">
<td><strong>PSD Table</strong></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td><strong>Country</strong></td>
<td><strong>India</strong></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td><strong>Commodity</strong></td>
<td colspan="2"><strong>Cotton</strong></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td colspan="2"><p>(HECTARES)</p>
<p>1000 480 lb. Bales</p>
<p>(PERCENT)</p>
<p>(KG/HA)</p></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td>2005</td>
<td>Revised</td>
<td></td>
<td>2006</td>
<td>Estimate</td>
<td></td>
<td>2007</td>
<td>Forecast</td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td>USDA<br />
Official</td>
<td>Post<br />
Estimate</td>
<td>Post<br />
Estimate<br />
New</td>
<td>USDA<br />
Official</td>
<td>Post<br />
Estimate</td>
<td>Post<br />
Estimate<br />
New</td>
<td>USDA<br />
Official</td>
<td>Post<br />
Estimate</td>
<td>Post<br />
Estimate<br />
New</td>
</tr>
<tr class="even">
<td><strong>Market Year Begin</strong></td>
<td></td>
<td>08/2005</td>
<td>08/2005</td>
<td></td>
<td>08/2006</td>
<td>08/2006</td>
<td></td>
<td>08/2007</td>
<td>08/2007</td>
</tr>
<tr class="odd">
<td>Area Planted</td>
<td>0</td>
<td>8873</td>
<td>0</td>
<td>0</td>
<td>9158</td>
<td>9158</td>
<td>0</td>
<td>9500</td>
<td>9520</td>
</tr>
<tr class="even">
<td>Area Harvested</td>
<td>8873</td>
<td>8873</td>
<td>8873</td>
<td>9166</td>
<td>9158</td>
<td>9158</td>
<td>9500</td>
<td>9500</td>
<td>9520</td>
</tr>
<tr class="odd">
<td>Beginning Stocks</td>
<td>8764</td>
<td>8764</td>
<td>8764</td>
<td>8264</td>
<td>8264</td>
<td>8264</td>
<td>7164</td>
<td>7577</td>
<td>7228</td>
</tr>
<tr class="even">
<td>Production</td>
<td>19050</td>
<td>19050</td>
<td>19050</td>
<td>21800</td>
<td>21863</td>
<td>21863</td>
<td>23500</td>
<td>23500</td>
<td>23900</td>
</tr>
<tr class="odd">
<td>Imports</td>
<td>400</td>
<td>400</td>
<td>400</td>
<td>400</td>
<td>350</td>
<td>400</td>
<td>400</td>
<td>400</td>
<td>400</td>
</tr>
<tr class="even">
<td>MY Imports from U.S.</td>
<td>0</td>
<td>118</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
</tr>
<tr class="odd">
<td>Total Supply</td>
<td>28214</td>
<td>28214</td>
<td>28214</td>
<td>30464</td>
<td>30477</td>
<td>30527</td>
<td>31064</td>
<td>31477</td>
<td>31528</td>
</tr>
<tr class="even">
<td>Exports</td>
<td>3450</td>
<td>3450</td>
<td>3450</td>
<td>5100</td>
<td>4400</td>
<td>5100</td>
<td>5000</td>
<td>3900</td>
<td>5100</td>
</tr>
<tr class="odd">
<td>Use</td>
<td>16500</td>
<td>15267</td>
<td>16500</td>
<td>18200</td>
<td>17100</td>
<td>16823</td>
<td>19300</td>
<td>18900</td>
<td>17650</td>
</tr>
<tr class="even">
<td>Loss</td>
<td>0</td>
<td>1233</td>
<td>0</td>
<td>0</td>
<td>1400</td>
<td>1376</td>
<td>0</td>
<td>1500</td>
<td>1350</td>
</tr>
<tr class="odd">
<td>Total Dom. Cons.</td>
<td>16500</td>
<td>16500</td>
<td>16500</td>
<td>18200</td>
<td>18500</td>
<td>18199</td>
<td>19300</td>
<td>20400</td>
<td>19000</td>
</tr>
<tr class="even">
<td>Ending Stocks</td>
<td>8264</td>
<td>8264</td>
<td>8264</td>
<td>7164</td>
<td>7577</td>
<td>7228</td>
<td>6764</td>
<td>7177</td>
<td>7428</td>
</tr>
<tr class="odd">
<td>Total Distribution</td>
<td>28214</td>
<td>28214</td>
<td>28214</td>
<td>30464</td>
<td>30477</td>
<td>30527</td>
<td>31064</td>
<td>31477</td>
<td>31528</td>
</tr>
</tbody>
</table>

Note: Production figures in the table include 937,000 bales of loose
cotton

## MY 2007/08 Record Production Raised Marginally 

The Post MY 2007/08 cotton production forecast is raised marginally
higher to a record 23.9 million bales[^1] based on the latest cotton
market arrivals and crop condition reports in the major cotton growing
states. Most cotton growing areas received good rains during September,
which has improved yield prospects in the rainfed central and southern
states. Based on the latest[^2] cotton planting estimates in various
states compiled by the Ministry of Agriculture, MY 2007/08 cotton area
is raised marginally to 9.52 million hectares. Current production
forecasts from various industry sources vary from 22.6 to 24.6 million
bales (29.0 to 31.5 million Indian bales of 170 kg). The Cotton Advisory
Board (CAB) is scheduled to meet in early December, wherein they will
come out with the first PSD estimates for the MY 2007/08 season.

Most cotton growing areas received good late-season rains in September
establishing excellent growing conditions for the crop. There have been
some reports of damage due to heavy rains and some minor pest (white
fly/mealy bug) infestations in the north (Punjab/Haryana) and some
pockets in Gujarat. However, improved yield prospects in the major
rainfed cotton growing belt in Gujarat, Maharashtra, Madhya Pradesh,
Andhra Pradesh and Karnataka will more than offset these losses (see
table 3). Post contacts report that the harvest is progressing well
under ideal weather conditions in most states. Market arrivals of cotton
through November 24, 2007 are estimated at 6.2 million bales compared to
4.6 million bales during the same period last year, supporting Post's
record production estimate. Market sources report that early season
arrivals have been heavy due to relatively strong cotton prices and
expectations of weakening prices later on as a result of the upcoming
record crop.

## Prices Firm on Strong Export Demand

Despite heavy market arrivals, domestic prices were relatively firm on
strong export demand. The strong international cotton prices have more
than offset the disadvantage of the Indian rupee value appreciation, as
a significant portion of the cotton arrivals thus far have been picked
up by exporters. The spot prices of commonly exported varieties are
currently trading at 60 to 68 cents/lb. Although the domestic prices are
likely to closely follow international cotton price movements during the
upcoming season, prices are expected to ease in December/January as
arrivals gain pace in most growing areas.

## Consumption Lowered on Depressed Demand

Post's MY 2007/08 consumption forecast has been revised lower to 19.0
million bales on weak export demand for cotton yarn and textiles due to
the recent appreciation in value of Indian rupee vis-à-vis U.S. dollar.
The available monthly estimates for cotton consumption by the local
industry (see table 4) shows a gradual slowdown in the growth of cotton
consumption. Although official figures are not available for August
2007, market sources report a further slowdown in the growth in cotton
consumption due to declining export sales and shrinking profit margins
due to the strong appreciation of the value of the local currency
compared to the other competing suppliers. Industry sources also report
a slowdown in domestic demand for textiles and clothing. Consequently,
Post has scaled down the earlier consumption forecast from 20.4 million
bales to 19.0 million bales, an increase of about 4.4 percent over last
year.

## Exports Prospects Improve on Strong International Prices

Comparatively strong international cotton prices have raised export
prospects for Indian cotton. Consequently, Post's MY 2007/08 export
forecast is raised higher to 5.1 million bales.

Market sources report that Indian cotton is currently amongst the
cheapest cotton vis-à-vis comparable cotton from other origins. Although
official figures are not available, market sources report that about 2.0
to 2.3 million bales have already been contracted for export, mainly for
China, Pakistan, Turkey, Bangladesh and South Asian countries. Most of
the export contracts have been for Shankar-6 (28 mm at 64-68 cents/lb.)
for delivery through early January. Industry sources expect exports to
gain pace in December/January as domestic prices ease on increased
arrivals, and overall exports to reach at least last year's level.

# SECTION II: Statistical Tables

## Table 2: Area, Production & Yield of Cotton in Major States

(Area in 000 hectares, Production in 000 bales of 480 lb., Yield in
Kg/Hectare)

  ------------- ------------ ------------- ------------- ------------- ------------- ------------- ------------- ---------------
                                                         **Final**     **Final**     **Final**     **Revised**   **Estimated**

  **STATE**                  **2001/02**   **2002/03**   **2003/04**   **2004/05**   **2005/06**   **2006/07**   **2007/08**

  Maharashtra   Area         2980          2800          2766          2840          2889          3124          3189

                Production   2674          2030          2420          4060          2811          4060          4841

                Yield        195           158           191           311           212           283           331

  Gujarat       Area         1687          1634          1647          1906          2077          2390          2517

                Production   2538          2381          3904          5700          6949          7886          8589

                Yield        328           317           516           651           728           718           743

  Madhya        Area         623           545           591           576           600           630           662
  Pradesh                                                                                                        

                Production   1562          1405          1534          1249          1405          1405          1562

                Yield        546           561           565           472           510           486           514

  Punjab        Area         600           449           452           509           557           588           648

                Production   722           586           808           1288          1562          2030          2030

                Yield        262           284           389           551           610           752           682

  Haryana       Area         610           519           526           621           583           533           478

                Production   429           683           898           1210          1015          1249          1171

                Yield        153           287           372           424           379           510           533

  Rajasthan     Area         347           386           344           438           472           350           365

                Production   547           390           714           859           859           625           703

                Yield        343           220           452           427           396           389           419

  Andhra        Area         1002          803           837           1178          1037          962           1096
  Pradesh                                                                                                        

                Production   2089          1542          2139          2538          2499          2733          3123

                Yield        454           418           557           469           525           619           620

  Karnataka     Area         591           393           313           521           450           370           360

                Production   547           390           328           625           508           468           468

                Yield        201           216           228           261           246           276           283

  Tamil Nadu    Area         200           85            103           129           136           133           130

                Production   390           234           293           429           429           390           390

                Yield        425           600           619           725           688           639           654

  Others        Area         90            53            51            68            72            78            75

                Production   59            78            78            78            78            78            78

                Yield        142           321           333           250           236           218           227

  Loose         Production   781           898           859           937           937           937           937

  All-India     Area         8730          7667          7630          8786          8873          9158          9520

                Production   12337         10619         13976         18973         19051         21862         23892

                Yield        308           302           399           470           467           520           546
  ------------- ------------ ------------- ------------- ------------- ------------- ------------- ------------- ---------------

## Table 3: Month-end Prices of Popular Varieties

(Prices in Rupees per metric tons)

+-----------+---------+-------+---------+---------+---------+-------+
| Year      | Bengal  | SG    | H-4     | Sh      | MCU-5   | D     |
|           |         | J-34  |         | ankar-6 |         | CH-32 |
|           | Deshi   |       |         |         |         |       |
+-----------+---------+-------+---------+---------+---------+-------+
|           | (below  | (25   | (28 mm) | (29 mm) | (33 mm) | (35   |
|           | 22 mm)  | mm)   |         |         |         | mm)   |
+-----------+---------+-------+---------+---------+---------+-------+
| 2006/07   |         |       |         |         |         |       |
+-----------+---------+-------+---------+---------+---------+-------+
| Aug       | 41620   | 48930 | 52020   | 57360   | 60180   | 1     |
|           |         |       |         |         |         | 11070 |
+-----------+---------+-------+---------+---------+---------+-------+
| Sep       | 41900   | 45830 | 50050   | 53150   | 59610   | 1     |
|           |         |       |         |         |         | 08260 |
+-----------+---------+-------+---------+---------+---------+-------+
| Oct       | 41340   | 44990 | 48930   | 51740   | 58490   | 97010 |
+-----------+---------+-------+---------+---------+---------+-------+
| Nov       | 40770   | 43310 | 48090   | 50330   | 73110   | 90000 |
+-----------+---------+-------+---------+---------+---------+-------+
| Dec       | 39930   | 43590 | 47800   | 50330   | 73110   | 90000 |
+-----------+---------+-------+---------+---------+---------+-------+
| Jan       | 37680   | 43300 | 48650   | 50620   | 58490   | 90000 |
+-----------+---------+-------+---------+---------+---------+-------+
| Feb       | 41060   | 48090 | 51740   | 52870   | 61300   | 92800 |
+-----------+---------+-------+---------+---------+---------+-------+
| Mar       | 41060   | 51740 | 53430   | 54830   | 62430   | 92800 |
+-----------+---------+-------+---------+---------+---------+-------+
| Apr       | 41340   | 50330 | 51740   | 52300   | 61860   | 89980 |
+-----------+---------+-------+---------+---------+---------+-------+
| May       | 42180   | 52300 | 52300   | 54270   | 61860   | 89980 |
+-----------+---------+-------+---------+---------+---------+-------+
| June      | 42180   | 52580 | 52870   | 54270   | 61860   | 88580 |
+-----------+---------+-------+---------+---------+---------+-------+
| July      | 44990   | 54830 | 56240   | 57360   | 63270   | 91390 |
+-----------+---------+-------+---------+---------+---------+-------+
| Average   | 41338   | 48318 | 51155   | 53286   | 62964   | 94323 |
+-----------+---------+-------+---------+---------+---------+-------+
| 2007/08   |         |       |         |         |         |       |
+-----------+---------+-------+---------+---------+---------+-------+
| Aug       | 43870   | 53150 | 55400   | 57360   | 63270   | 89980 |
+-----------+---------+-------+---------+---------+---------+-------+
| Sept      | 43870   | 52020 | 56520   | 58490   | 63270   | 89980 |
+-----------+---------+-------+---------+---------+---------+-------+
| Oct       | 42740   | 50050 | 53990   | 56240   | 63270   | 80140 |
+-----------+---------+-------+---------+---------+---------+-------+
| 27-Nov    | 43020   | 51180 | 53430   | 55400   | 58490   | 80140 |
+-----------+---------+-------+---------+---------+---------+-------+

# 

Source: Cotton Association of India (earlier called East India Cotton
Association)

## Table 4: Cotton Consumption by Mills and Small Sector Units by Month

(Figures in Million U.S. bales)

  ------------------- ----------------- ----------------- -----------------
  Month\\Year         2004/05           2005/06           2006/07

                                                          

  Aug                 1.096             1.350             1.402

  Sept                1.068             1.186             1.400

  Oct                 1.109             1.206             1.353

  Nov                 1.071             1.178             1.391

  Dec                 1.186             1.277             1.444

  Jan                 1.129             1.281             1.423

  Feb                 1.095             1.190             1.336

  Mar                 1.184             1.342             1.436

  Apr                 1.170             1.277             1.410

  May                 1.206             1.312             1.397

  Jun                 1.192             1.309             1.394

  Jul                 1.218             1.360             1.438

                                                          

  TOTAL               13.726            15.267            16.823
  ------------------- ----------------- ----------------- -----------------

Source: The Textile Commissioner's Office

[^1]: India's fifth consecutive record crop.

[^2]: Provisional estimates subject to further revision.