ICF Conference, Coimbatore Presented by: Sandeep Hota World Cotton Scenario ICF Conference, Coimbatore August 19, 2016 Presented by: Sandeep Hota

Global Cotton Scenario Where do we go from here…. Overview Global Cotton Scenario What to Look Out For! Where do we go from here….

World Cotton Production Better yields expected to increase 16/17 crop by 5% Source: USDA World Agricultural Supply and Demand Estimates

World Cotton Mill Use Mill use pressured by both weak global demand and polyester Source: USDA World Agricultural Supply and Demand Estimates

World Cotton Stocks Stocks fall for the second year as flat mill use exceeds the crop Source: USDA World Agricultural Supply and Demand Estimates

World Major Cotton Importers Bangladesh becomes the largest importer, China drops to third Source: USDA World Agricultural Supply and Demand Estimates

India Cotton Balance Sheet 16/17 mill use expected to weaken due to lower China yarn demand Source: USDA World Agricultural Supply and Demand Estimates

USA Cotton Balance Sheet Crop on the rise and larger than export gain Source: USDA World Agricultural Supply and Demand Estimates

World Major Origin Stocks China accounts for 62% of global stocks, followed by India Source: USDA World Agricultural Supply and Demand Estimates

Competing crop prices Cotton farmers had a good chance to hedge Corn prices remain under pressure

China Historical Stock Policy Strategic reserve stock expected to come down to 7.4 million tons Million Tons Reserve Beginning Stocks Reserve Domestic Purchase Reserve Import Purchase Release Local Cotton Release Import Cotton Reserve Ending Stocks Total China Stocks Target Price 08/09 1.20 2.80 0.00 0.68 0.53 2.78 4.65 NA 09/10 0.94 0.18 1.66 3.10 10/11 1.04 0.62 2.31 11/12 3.14 0.80 0.26 0.08 4.22 6.77 $1.40 12/13 6.84 0.75 3.26 0.96 7.53 10.96 $1.45 13/14 6.58 0.13 2.22 0.15 11.88 13.65 14/15 0.31 0.07 11.50 14.79 11 to 14 16.56 1.69 6.05 1.26 10.93 $1.40+ 15/16 1.75 0.30 9.45 13.13 $0.975 16/17 ?.?? 2.05 7.40 11.04 $1.04? 2011 - Announced intent to support farmers at 19,800 yuan/ton ($1.35 to $1.40 per lb) 2012 - Increases support price to 20,400 yuan/ton ($1.40 per lb.) 2013 - Held support at 20,400 yuan/ton 2014 - Change of strategy to direct farm subsidies, Target Price for Xinjiang at 19,800 - Other provinces, direct support at 2,000 yuan/ton ($0.15 cents/lb) 2015 – Reserve fall auctions failed, Spring auctions surged with target over 1.63 million tons. 2016 – 1.8 million tons sold since auction started in May. When will the reserve start restocking? Source: USDA World Agricultural Supply and Demand Estimates

World Free Stocks Most stock indicators are flat except for China is declining Source: USDA World Agricultural Supply and Demand Estimates

World Fiber Prices Cotton demand impacted by Polyester prices Source: Emerging Textiles

World Fiber Consumption Growth in fiber consumption is mainly coming from synthetics Source: International Cotton Advisory Committee, Commonwealth Secretariat, Wool Secretariat, Fiber Economics Bureau, Fiber & Biopolymer Research Institute

World Polyester Capacity China’s polyester capacity approaches 50 million tons ROW Increased from 9.1 to 20.5 million tons China Increased from 1.3 to 49.8 million tons Source: PCI Fibers, Fiber & Biopolymer Research Institute

World Polyester Utilization Unutilized capacity roughly same as global cotton crop Increased from 1.7 to 21.4 million tons Increased from 8.7 to 50.1 million tons China Increased from 1.3 to 49.6 mil. tons Source: PCI Fibers, Fiber & Biopolymer Research Institute

Real GDP for Selected Countries IMF points to expansion for the World led by emerging markets 2017 shows India is flat and China declines further…. Historically finished goods consumption is flat when GDP is less than 2.5% Source: International Monetary Fund

World Supply & Demand 2016/17 20.03 22.48 24.47 21.59 -11.8% 26.21 Ending stocks to decline for second consecutive season Million Metric Tons 13/14 USDA 14/15 15/16 16/17 Change ‘15 to ’16 Beginning Stocks 20.03 22.48 24.47 21.59 -11.8% Crop 26.21 25.93 21.10 22.12 +4.8% Imports 8.98 7.78 7.60 7.41 Use 23.90 23.98 23.99 24.23 +1.0% Exports 8.91 7.71 7.61 Loss -0.08 0.03 -0.01 -0.02 Ending Stocks 19.51 -9.6% Stocks to Use 94.1% 102.0% 90.0% 80.5% -9.5 %pts Stocks as Month’s of use 11.3 12.2 10.8 9.66 -7.1% Crop less Use 9.7% 8.1% -12.0% -8.7% Source: USDA World Agricultural Supply and Demand Estimates, & USDA February Outlook (*)

Cotton prices trend for 2016/17 Crop In first month, A-Index down from 85.85 to 78.40 & ICE Dec ‘16 from 78 to 69 c ?

Thank You