Page 106 - DECO405_MANAGERIAL_ECONOMICS

Unit 6: Production Theory

He said, "CAB has over estimated the production and under estimated the consumption, Notes
textile mills would be forced to curtail their production for want of raw cotton from July
onwards resulting abnormal increase in cotton and yarn price." CAB has reported, cotton
production in the northern region (Punjab, Haryana and Rajasthan) will be less than 4
million bales, which has been endorsed by the ginning and trading community. In the
past several years, Maharashtra farmers have been selling sizable kapas in Gujarat to fetch
higher income whereas in the current season, since the farmers are realising good prices
in Maharashtra itself, trading of kapas to Gujarat has come down drastically. This will
result in Gujarat crop to less than 10 million bales, he said, Thulasidharan said, in
Maharashtra, both production and quality, has been affected from the fact of large scale
arrivals of low micronnaire cotton. "This in turn is an indication of severe crop damage in
this state, therefore Maharashtra crop would be only around 8 million bales as against the
CAB estimate of 9.2 million bales".
On extra long staple (ELS) cotton production, he said, erratic weather condition and
unseasonal rains have seriously affected the crop in Karnataka and Madhya Pradesh.
Total DCH production may not cross even 125,000 bales, out of which sizeable quantity of
arrivals is in the hands of exporters due to recent export clearance and grant of additional
quota. With abnormally high ELS cotton prices (280 to 285 cents for PIMA and GIZA 88),
Indian spinning sector will have serious setback in fine and superfine counts, said
Thulasidharan.
He further said the hoarding of ELS cotton by the exporters has increased the DCH 32
cotton price from 53,000 per candy to 70,000 in a span of 10 days (spot prices), an
increase of 24 per cent.
Thulasidharan estimated cotton production for the season 2010-11 will be only around
30.9 million bales. As far as cotton consumption is concerned, he stated, that Textile
Commissioner Office has already estimated at 27.5 million bales for the current cotton
season. "Non-submission of data to the Textile Commissioner's office is a handicap in
arriving at the consumption figure. If the consumption of non-reporting mills and also the
capacity being added in the spinning sector, the requirement including non-mill
consumption would exceed 28.5 million bales."
"Viewing the production and consumption data, any further export of cotton would
seriously affect the entire textile value chain. Even with the current cotton position, mills
will face shortage of cotton from July onwards thus resulting in abnormal increase in yarn
prices, ultimately affecting the common man".
The Association has sought the ministry of textiles to take up the matter suitably with the
commerce and agriculture ministries and restrict the cotton export at 5.5 million bales and
pointed out that the permitted quantity of export of cotton has already exceeded the
quantity decided by Group of Ministers by 200,000 bales.
Question

Do you think that the estimates of Cotton Board are logical? Is it easy for the Board to
estimate production and therefore estimate the total revenue and the marginal revenue?
Source: www.business-standard.com

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