The progress of China's cotton textile industry backed by a vibrant farm sector is a cause of concern for Indian mills. China's accession to World Trade Organisation last year has given it improved access to a number of key markets in certain textile categories. China's ability to deliver everything from yarns to readymades at amazingly low cost is a threat to Indian exports. Cheap Chinese textile products are finding their way to the local market legally and by way of smuggling.
According to Anil Jain, chairman of Indo Count, the year-on-year rise in Chinese cotton consumption and resultantly in yarn production is not entirely export driven. I think the sustained growth in domestic demand for textiles is an important factor for the Chinese industry' s capacity expansion. The size of the industry in China is double that of India and it is modernising and growing, he said.
Some observers think stocks of textiles with factories and the uncertain world economic outlook in the wake of Iraq war will discourage Chinese production growth in the 2003-2004 season to begin in August.
The share of cotton in yarn production is set to fall as prices of this natural fibre have remained high owing to world production slipping 11 per cent to 18.894 million tonnes in 2002-03.
The outlook at this point is uncertain. I will go with the Cotton Outlook forecast that world consumption of cotton in 2003-04 will be up 272,000 tonnes to 21.281m tonnes. China is to process 100,000 tonnes extra at 6.05m tonnes during the next season, said Jain.
Chinese cotton imports next season are tipped to be around 700,000 tonnes. Inventories as percentage of consumption are likely to fall significantly below 30. Stocks in the rest of the world will fall as China buys, reducing stock to consumption ratio below 40 for the first time in ten years, says Cotton Outlook.
USDA data suggests world cotton stocks at July 2004 end would be 7.426m tonnes.
Cotton Outlook has forecast 9 per cent rise in fibre production to 20.672m tonnes in 2003-04. Crop area will rise to 32.591m hectares, up 6.8 per cent on the current season. Current cotton prices are an incentive for farmers to grow cotton on land diverted to other crops earlier.
World productivity is expected to improve to 634 kg a hectare from 623 kg a hectare this season, provided growing conditions remain normal. But crop forecasts should be accepted with a pinch of salt.
Cotton Outlook was wrong with a crop forecast for the current season when El Nino related weather in many areas led to a 581,000 tonne fall in lint production to 18.894m tonnes.
The crop outlook for India for the next season has improved as land coverage is to rise 7 percent to 8.4m hectares and yield by 21kg to 324kg a hectare.
Indian cotton productivity is still about half the world average and way behind Pakistan' s 609 kg a hectare. Israel leads cotton producers with productivity of 1,637 kg a hectare. — Agencies.
March 24, 2003
