While US, China, Sudan, Turkey, Egypt and Australia are the major players in the international export trade, the player on the import scene are EU, US, Brazil, India and the Middle-East. US is a major exporter of raw cotton, and at the same time, one of the largest importers of ready-made garments.

Acreage under cotton crop is largely influenced by several factors related to climate, the supply-demand scene in soybean and corn sectors (between which the acreage is shared) in the major producing countries like USA, synthetic industry, jute and silk sectors, etc. The global supply and demand statistics released by the International Cotton Advisory Committee (ICAC) and the United States Department of Agriculture (USDA) periodically are closely watched by the trading community.

Futures prices of cotton at the New York Board of Trade (NyBOT) serves as the 'reference price' for cotton traded in the international market. World cotton prices fell sharply during most part of 2001, NyBOT witnessing a sharp downfall in prices from 61.78 US Cents/lb (as on Jan 2, 2001) to the low of 28.20 US Cents/lb (as on Oct 26, 2001), a sharp fall by 54.35%. Towards mid-2002, prices recovered to 53 Cents, and are currently ruling at 58.85 (July '03 contract, as on 9th July 2003).

The Indian Scene
Cotton accounts for more than 75% of India's annual fibre consumption in the spinning mills and more than 58% of its annual fibre consumption in the textile sector. Textile industry in India (major share of which is constituted by cotton ) currently adds about 14% to the industrial production and 4% to the gross domestic product (GDP). It provides employment to about 35 million persons. Together with allied agriculture sector, it provides employment to over 90 million people. The contribution of this industry to the gross export earnings of the country is over 30% while it adds only 7-8% to the gross import bill of the country. At the average price of Rs 45/kg of over 170 lakh bales (average annual consumption, 1 bale = 170 kg) raw cotton traded in the country, the market size of raw cotton in India is over Rs 130 million.

India's cotton supply and demand trend (in lakh bales of 170 kg)

Maharashtra, Gujarat, Andhra Pradesh, Haryana, Punjab, Rajasthan and Karnataka, are among the major producing States of the country. Bengal Deshi, V-797, Jayadhar, J-34/ bikaneri NarmaSg, Y-1, NHH-44, LRA-5166, H-4/MECH-1, S-6/4, MCU-5, DCH-32, 26 mm cotton are among the various varieties of cotton cultivated across the country. 'Short', 'Medium' and 'Elongated Long' Staple Length cotton are major grades, which is based on the staple length of the fibre.

Among several other reasons, it is 'the lack of availability of desired quality cotton' that has made many Indian buyers (particularly the export oriented units) to opt for purchases of foreign cotton despite enough domestic supplies. Most importing mills in India are ready to pay 5-10% premium for foreign cotton due to its higher quality (less trash, uniform lots, higher ginning out turn) and better credit terms (3-6 months vs. 15-30 days for local). Mills using ELS have been pleased with US Pima and its fibre characteristics. US has emerged as an important supplier in the last two seasons. Apart from US, India is also importing from Egypt, West Africa, the CIS countries and Australia on account of lower freight and shorter delivery periods offered to Indian buyers.

Indian cotton farmers were producing enough to meet the domestic demand till 1998-99. Failure of monsoon in the main producing regions of Gujarat and Maharashtra during the two consecutive years of 1999 and 2000 pulled down the country's output during the corresponding years. Imports rose by an astounding 278.48% during 1999-00 (over the previous year). Similar quantum of imports continued into the subsequent years, turning the status of India from 'exporter' to 'importer' in the international cotton trade scene.

Trading centres of Mumbai, Saurashtra region of Gujarat and Rajasthan serve as reference markets for prices of cotton traded across the country. Currently, raw cotton prices in upcountry markets across the country is ruling in the range of Rs 41-89/kg for various varieties/grades.

Cotton prices in India are influenced by various demand-supply factors operating with the country, and the international raw cotton prices and demand for finished ready-made garments.