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Below the Quote On India`s Cotton Crisis: Record Low Stocks Spark Export Surge Amidst Consumption Boom by Amit Gupta, Kedia Advisory

India grapples with a historic low of 20 lakh bales of cotton, as consumption skyrockets driven by new mill establishments, while exports surge by 125% due to competitive pricing. Despite consistent pressing estimates, conflicting production figures and potential supply shortages loom, raising concerns for the industry's stability amidst rising global prices.

Record Low Closing Stocks: India faces a record low closing stocks of cotton at 20 lakh bales (170 kg each), significantly lower than the previous season's 28.90 lakh bales.

Increased Consumption: Higher cotton consumption is attributed to the establishment of new mills, with an annual addition of 10-12 lakh spindles resulting in consumption rising by 12-15 lakh bales annually.

Rising Exports: Exports for the current season have surged by 125% compared to the previous year, driven by lower production and competitive pricing, reaching 21.50 lakh bales by April-end.

Pressing Estimate Unchanged: Despite the low closing stocks, the pressing estimate remains steady at 309.70 lakh bales, indicating consistent demand and supply dynamics.

Conflicting Production Estimates: Differences in production estimates between the Committee on Cotton Production and Consumption (CCPC) and the Cotton Association of India (CAI) are attributed to varied methodologies, with CAI basing its estimate on market arrivals since October.

Export Competitiveness: Indian cotton's competitiveness in the international market has been affected by rising prices on the InterContinental Exchange, New York, potentially impacting export volumes.

Potential Supply Shortage: Some mills faced cotton stock shortages in September 2023, raising concerns about a potential repeat scenario in the current year due to record low closing stocks.

Crop Status Confusion: Confusion over production estimates in the previous season was fueled by farmers holding back their produce after experiencing favorable returns, leading to discrepancies in reported crop sizes.

Conclusion

India's cotton sector faces a critical juncture with record low stocks amidst surging consumption and exports. The discrepancy in production estimates adds complexity to an already challenging landscape, necessitating collaborative efforts to ensure supply stability and competitiveness in the global market. As uncertainties persist, proactive measures are essential to mitigate risks and sustain the industry's resilience in the face of evolving market dynamics.

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