Cotton is essentially grown for its fibre, which is used the world-over in textile manufacturing.
Cotton fibre is one of the most important textile fibres, accounting for around 35% of the total textile fibre used in the world.
Its strength, absorbency and capacity to be washed and dyed, make cotton an adaptable raw material for producing a variety of textile products such as clothes, space suits, household items and industrial products.
Cotton is classified on the basis of staple, grade and character of each bale - staple refers to the fibre length; grade ranges from course to premium and is a function of colour, brightness and purity; and character refers to the fibre's strength and uniformity.
Global Scenario: Cotton production and trade is widely spread across the world, with more than 80 nations cultivating the crop. However, its production, consumption and trade are dominated by a few nations.
The world cotton production in 2012-13 marketing year (July – August) is forecasted to be 26.25 million metric tonnes (MMT) (154.41 million bales of 170 kg each) as compared with 27.44 MMT (161.35 million bales of 170 kg each) in 2011-12 marketing year.
The world's four largest cotton-producing countries are China, India, USA and Pakistan. They account for nearly 79% of the world's production. The other major producers include Brazil and Uzbekistan.
The top three consumers of cotton are China, India and Pakistan, which together account for twothirds of the world's consumption, which is estimated around 23.3 MMT. Turkey, Brazil and the USA are the other major consumers.
In the recent years, the global trade has been around 7-8 MMT.
While USA is the largest exporter of cotton, accounting for over one-third of the global trade in raw cotton, China is its largest importer.
India's annual production of cotton has been steadily increasing in the recent years supported by a rise in acreage, better genetically modified seeds and improved practices.
India is expected to produce 33.4 million bales of cotton from acreage of 11.61 million hectares in 2012-13 (October – September).
In India, the yield of cotton is estimated to be at 489 kg per hectare against the world average of 766 kg per hectare. In India, cotton is planted from the end of April through September, and harvested from October to January, based on the time of sowing.
India's cotton consumption increased by 15% from 21.9 million bales in 2005-06 to 25.3 million bales in 2011-12. This further increased to 27.0 million bales in 2012-13.
The states of Gujarat, Maharashtra and Andhra Pradesh are the major producers of cotton, accounting for about 75% of the total production.
India has been a major exporter of cotton, since 2005-06 and currently, the world's second largest exporter. It is likely to export 7 million bales of cotton in 2012-13.
India mostly imports Long and Extra Long Staple (ELS) cotton from the US, Egypt, and West Africa.
Factors Influencing the Market:
The domestic demand supply scenario, inter-crop price parity, cost of production and international price situation are the major factors that influence prices in the market.
Weather, pests, diseases and other risk factors associated with agricultural crops also have a bearing on cotton production. Government policies with relation to import, export and Minimum Support Price are significant influencers of cotton prices. Cotton yarn accounts for around 70% of the total yarn production in India. Thus, the price of cotton is a very important factor that influences the health of India's textile industry. And the Government usually considers both the cotton and textile sectors while deciding on its polices.
Cotton yarn prices at different markets across the country show a high correlation of above 90% with India's raw cotton prices.
Global trade is particularly important for cotton. In addition to around 30% of global cotton fibre production being traded, it is also traded indirectly as yarn, fabric and clothing.
As cotton is used primarily in manufacturing products such as clothing and home furnishings, the overall health of associated industries and the economic well-being of final consumers are important.
New developments in the textile industry, with regard to the adoption of new technology, fibres, mechanisation, and so forth, impact cotton prices in the long run.
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