Sept. 17 (Bloomberg) -- The cotton harvest in India, the second-biggest producer and shipper, may be less than forecast if monsoon rains last longer than normal, according to the Confederation of Indian Textile Industry. Futures advanced.
Production in the year from Oct. 1 may be less than the 32.55 million bales estimated by the Cotton Advisory Board last month, Confederation Vice Chairman Prem Malik said by phone from Mumbai. Output this year is estimated at 29.5 million bales, according to the board. An Indian bale weighs 170 kilograms.
The missed forecast may further tighten global supplies, stoking prices that have surged to the highest level in 15 years on slumping inventories and damage to the crop in China, the largest producer. U.S. mills have been “panic” buying, according to brokerage Varner Bros. in Cleveland, Mississippi.
“The expectations that the Indian monsoon may linger for longer than normal is something of extreme relevance to the international cotton market,” said Luke Mathews, commodity strategist at Commonwealth Bank of Australia. “Global supplies are extremely tight.”
Cotton is the best performer over the past year on the UBS Bloomberg CMCI Index, surging 47 percent. The most-active contract, for delivery in December, advanced as much 1.5 percent to 97.18 cents a pound on ICE Futures U.S. in New York today, the highest price since June 1995.
‘Affect the Crop’
“If the rains persist, then definitely it’s going to affect the crop,” Malik said yesterday, without giving an estimate for the harvest. “The plants will not get the sunlight,” said Malik, 67, who also restated a call from the group for India’s cotton exports to be delayed from next month to January.
India’s government plans to allow the export of as much as 5.5 million, 170 kilogram bales in the year from Oct. 1. Exports this year may be 8.3 million bales, according to an estimate from the Cotton Advisory Board.
“We are nowhere saying exports should be banned, exports should be allowed starting January,” said Malik, who’s worked in the textile industry for three decades. Indian textile makers risk being “stalled because the availability of raw material is not there,” said Malik.
India’s monsoon rains, the main source of irrigation for the nation’s 235 million farmers, normally draw to an end from September, the last month of a four-month season. Still, so far this September, rains are 122 percent of the 50-year average and clouds will begin to withdraw only by the end the month, the Indian Meteorological Department said on Sept. 14.
In the western state of Gujarat, the nation’s biggest cotton producer, rains were 54 percent above normal between June 1 and Sept. 15, according to the weather office. In Maharashtra, the second-largest grower, rains have been 25 percent more than average, it said.
“The global market does need a rebound in production to come through to help alleviate the supply tightness,” said Commonwealth Bank’s Mathews. “If we miss output expectations in any nation, let alone a large producer and exporter such as India, it is something that is very, very important.”
Global cotton inventories will fall to 45.4 million, 218 kilogram bales in the 12 months to July 31, the lowest level in 14 years, according to U.S. Department of Agriculture data.
‘In a Panic’
Rogers Varner, president of Varner Bros. in Cleveland, said yesterday that U.S. mills “have been in a panic” seeking supplies. “The higher the price goes, the more afraid the mills get and the more buying that they’re doing,” Varner said.
Cotton futures may surge to $1.25 a pound by January as supplies dwindle, O.A. Cleveland, a professor emeritus in agricultural economics at Mississippi State University, said on Sept. 14. Prices may reach as much as $1.05 within six weeks because supplies are tight and demand is increasing, John Flanagan, president of Flanagan Trading Corp., said Sept. 15.
India will limit cotton exports to 5.5 million bales in the season from Oct. 1, with a “prohibitive” duty to be imposed on shipments above that level, Commerce Secretary Rahul Khullar said on Sept. 4. Textile Secretary Rita Menon said on Sept. 14 that India plans to delay registration of export contracts by two weeks until Oct. 1.
The cotton crop in China is in a worse condition this year than in 2009 after low temperatures and prolonged rains delayed planting and crop development, the Xinhua News Agency said Sept. 11, citing Ma Shuping, deputy director of planting at the Ministry of Agriculture. The nation will need to boost imports as the textile industry expands, Xinhua cited Ma as saying.
The USDA on Sept. 10 raised its estimate of China’s cotton imports in the 2010-2011 season to 2.776 million metric tons from last month’s forecast of 2.722 million tons as the production outlook weakened.
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