Weak rains may hit India's 2011/12 cotton exports

India's cotton exports in 2011/12 could fall from the 6.5 million bales approved the previous year as poor rains reduce the amount of land sown with the crop in the world's second-largest producer and exporter.

Initially the country's cotton acreage was expected to rise 15 percent in 2011/12 on record high prices, but scant rainfall in key growing areas may prompt farmers to go for other crops like corn and soybean and even trim per hectare yield of cotton.

India, Asia's largest cotton exporter, supplies the fibre to China, the world's biggest consumer. Its exports in 2010/11 helped to cool international prices in a year when adverse weather trimmed crops in China, Pakistan and Bangladesh.

Total world exports were about 36 million bales in 2010/11, according to the U.S.-based International Cotton Advisory Committee (ICAC) with global production at 114 million bales.

India's western states of Gujarat and Maharashtra and southern Andhra Pradesh accounted for over 75 percent of the country's total production in the cotton marketing year that began in October and all three states have received very poor rainfall in June, data from the weather bureau showed.

Ahead of cotton sowing, a sharp rise in acreage was expected because of high returns on cotton and a forecast of near normal monsoon rains, raising concerns other crops might be squeezed out.

But poor rainfall in June derailed sowing plans as more than half of the cotton area in these three states is rain-fed.

"I don't think the area will rise this year. Soil moisture level is very low. It is not allowing farmers to sow any crop in Gujarat," said a former president of the Cotton Association of India, who declined to be named.

"If we didn't get enough rains this week, chances are the area may even go down."

Indian farmers have cultivated cotton on 3.517 million hectares as on July 1, down 22 percent compared to the sowing done by this time last year.

In the 2010/11 cotton year, the total area sown hit a record 11.16 million hectares.
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March factory PMI steady, input costs at series high

The strong pace of expansion in India's manufacturing sector steadied in March, helped by sustained new orders and output, while input prices were at their highest in at least six years, signalling further inflationary pressures, a survey showed on Friday.

The HSBC Markit Purchasing Managers' Index , based on a survey of around 500 companies, was unchanged at 57.9 in March from February, the highest since November.

The key index of manufacturing in Asia's third largest economy has now been above the 50 mark that divides growth from contraction for two years. "The momentum in India's manufacturing sector held up well in March, suggesting that growth is not an immediate concern," said Leif Eskesen, chief economist for India & ASEAN at HSBC. "Output growth kept up the pace and the inflow of new orders accelerated, holding promise of a continued strong momentum in output in the months ahead."

The index for new orders rose to 64.2 last month from 62.4, its fastest growth since August 2008, reflecting strong demand and favourable economic prospects for the $1.3 trillion economy. India's finance ministry expects the economy to grow 8.6 percent in the fiscal year that ended on March 31 and 9 percent in the current year.

The input price index rose to its highest level last month since the survey began in April 2005, propelled by further rises in raw material costs and crude oil prices which have surged 17.6 percent since the beginning of February.

Tensions in Libya and the Middle East have kept global crude oil prices above $100 a barrel since February and were pushed higher over concerns about the Japanese earthquake and ongoing nuclear crisis at Fukushima.

India's wholesale price index rose an annual 8.31 percent in February on higher fuel and manufactured product prices, according to official data. Supply bottlenecks and further rises in crude oil could push domestic prices higher, beyond the 7 percent expected by the finance minister for end-March. Output prices in March rose at a much faster than the previous month, the survey showed, as producers passed on rising input costs. Backlogs of work also rose sharply, driven by growth in new orders and capacity constraints.
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