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Mohammed Farhad Miah
Head of Marketing and Sales
Eusof Group
Fundamentals of Cotton Demand and Supply.
To Develop an effective Hedging Strategy
A Critical economic issue for end –user.
Unforeseen natural and man-made events raise the economic stakes.
Ever- present price risk , Depend on Coarse – Premium
Security of locking in a price
Risk Manager assess business goals
Good faith
Other hedging Transactions-EFP,EFS,OFS
HISTORY OF USE COTTON IN BANGLADESH
Year Event
Pre-1947 11 Composite Mill, Having 1.1Mn Spindles and 2700 loom for weaving and Handloom Cottage inds.
1956 Capacity Increases to 3.20 Mn Spindles
1972 Capacity Declines to 0.8 Mn Spindles. All Textile Mill are nationalized and put under BTMC
1982 Privatization of Textile Mills starts when Government Adopts open Market Policy.
1999 Capacity reaches 2.4 Mn Spindles in the Private Sector and 0.40Mn spindles in Public Sector.
2007 Capacity grows to 6.30 Mn Spindles in290 Private Mills and where 0.40 Mn spindles public Mills.
2008 Capacity grows to 7.20Mn Spindles in 341 Mills
2009 Capacity grows to 7.60Mn Spindles in 350 Mills
2011 Capacity grows to 8.70Mn Spindles in 385 Mills
2015 Capacity grows to 11.05 Mn Spindles in 413 Mills and Rotor 0.257 Mn
Up tread Scenario of Bangladesh.
0
2
4
6
8
10
12
1947 1956 1972 1999 2007 2009 2011 2015
No.s of
Spindles in mn
setup
No.s Rotor
Nos of
Loom
Source:BTMA
Spindle Nos-
.80 Millions
Bangladesh
1971 After 44 Yrs
Blooming in PTS
Exporting
Countries
India CIS Africa
Australia
USA
Consumption
5.85 Million
Bales yrly
Reasons For Higher Demand of Cotton
seek sustainable worth in Textile- sector where
product is almost 95% imports substitute.
2. By adopting denationalization policy since 1983 ‘s emerge private sector spinning and mostly double production
capacity.
3. Backed by Gov. Spinning sub-sector demand high
Cotton consumption in Domestic and gradual feeding in
RMG of Bangladesh.
Reasons For Higher Demand of Cotton
4 .RMG export began in 1980 and Start new Era .
Increases Cotton import but 1990 shows another amazing
turning opportunities.
5.More attraction for Blooming demand of cotton due to GSP of EU.
6.To meet huge demand of millions of peoples (160 mn) .
Why Cotton Traders/Suppliers Over Bangladesh
(Investment Over $4.50 Billions )
No of Unit Installed Machine
Capacity
Production
Capacity (mn)
Cotton Consumption
Spinning Mills 413 Spindles -11.05 mn 2250 Mn Kg Approx-2520 mn kg
Rotor-0.257 mn
Fabrics Weaving 792 Shuttleless
Denim-30,H.Tex-22 Shuttle both-48000
Dying –Printing
Finishing
240 2720 mn (m)
Ba
ng
lad
esh
is
the
Se
con
d la
rge
st g
arm
en
t e
xp
ort
er
an
d s
eco
nd
big
ge
st c
ott
on
im
po
rte
r w
orl
dw
ide
.J L
ea
Tremendous Growth of RMG Sector
0.00
100.00
200.00
300.00
400.00
500.00
600.00
700.00
800.00
900.00
2003-2005 2005-2007 2007-2009 2009-2011 2011-2013 2013-2015
Knitwear
Woven Wear
RMG
Source:BKMEA
Qty in Mn
doz pcs
Why Cotton Traders/Suppliers Cotton over Bangladesh
Vision
-2021
• R
MG
E
arn
ing
sh
ares
in
G
DP
0
20
40
60
80
100
120
140
160
2003-2005 2005-2007 2007-2009 2009-2011 2011-2013 2013-2015
Share in GDP(%)
Share in National Export(%)
Knitwear Share in National
Export
Why Cotton Traders/Suppliers Over Bangladesh (Vision-2021)
Facts about Bangladesh Knitwear untill or in FY-2014-2015
Import scenario of Cotton Last few Yrs
(Source : BTMA)
Year Total Import
(mn Bales)
Indian Market
Status
(mn bales)
Share of
Indian cotton
Growth in
Indian Cotton
Import
2010 5.202 1.12 22% -
2011 4.378 1.66 38% 48%
2012 4.876 1.31 27% (-)21%
2013 5.181 1.73 33% 32%
2014 5.591 2.20 39% 27%
2015 6.103 2.99 49% 36%
Country Import Own Production Stock Available USED Export
Bangladesh 5.80 -- -- 5.90 -
Vietnam 5.20 5.20
China 5.00 23.80 64.50 32.00 -
Turkey 3.80 - 3.80 6.40
Indonesia 3.10 3.10
India -- 26.80 11.20 24.50 5.50
United States 12.90 3.60 - 9.50
Brazil 6.70 6.90 - 4.20
Pakistan 7.20 2.30 9.80
Rest of World 12.20 22.90 14.80 31.00 10.07
World 34.90 100.20 103.30 109.20 34.90
Cotton statement for the Month of March, 2016
So
urc
e:U
SD
A
Statistics of World Cotton Producing Country
World Cotton USE in Domestic Consumption
0 5000 10000 15000 20000 25000 30000 35000 40000
China
India
Pakistan
Bangladesh
Vietnam2015-16
2014-15
2013-14
2012-13
1000 480 Ib . Bales
Countrywise Statistics of Cotton Cons.in Million Bales
World Cotton Stock And Domestic Cons.
0
20000
40000
60000
80000
100000
120000
2012-13 2013-14 2014-15 2015-16 2016-17
Beginng Stock
Total Dom.Cons
Ending Stock
Source:
USDA,March,
2016
At a Glance Forex Earning in Bangladesh.
(Value in Million USD)
0
10000
20000
30000
40000
50000
60000
2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2020-2021
Knitwear only
Total RMG
BD Total Export
Projected
Source : EXPORT PROMOTION BUREAU
(EPB) ,
The Vision - 0 is significant (GDP Expected doubled )
Democracy and effective Parliament
Political framework ,Decetralisation of power & Peoples Participation.
Good governance and avoiding political partisanship.
Transformation of Political Culture.
A Society Free from corruption.
Empowerment equal rights for woven.
Economic Development & Initiatives-Environment,Housing,energy Security,Industry,Education,Food& Nutrition,Alleviation of proverty,Population and Labour Force
Cotton Supply Chain Management(SCM)
Demand forecasting
• Purchasing-Requirements Planning-Inventory.
Logistics
• Distribution Planning-Order Processing-Transportation-Customer Service. Physical
Distribution
• Strategic Planning-Information Services- Marketing/Sales- Finance. SCM
• Warehousing-Material Handing-Packaging-Finish Raw Goods Inventory.
World Cotton
Depo Textiles
Sub-Sector
Cotton
Farmer’s/Ginner’s
USER
Human
Being Cotton By Product
End user
Demand Creator of
Raw Cotton
Cotton is white , Peace of Life
Supply of Raw
Cotton
Financial Institute, Insurance, Freight
Forwarder, Logistics supporter
Cloth for Wear
Cycle for Cotton USE
SWOT ANALYSIS in Demand & Supply of Cotton
STRENGTH:
•To have good relation with Sellers- Buyers.
•To positive responses from government to
mitigate issues •Strong Field For COTTON USE
•USDA Marked-UP as a 2ND Biggest Importer in
World.
•Assurance of Payment against Supplied Goods under UCPDC-600
THREATS:
•At 90-95% import based infrastructural
Establishment from national Banks.
•In quality of goods in delivery Doubtful by Suppliers .
•Intime Shipment is required in Factory .
OPERTUNITIES:
•To ensure manufacturing garments with quality of
Men's/women's Wear to treat as a Market Leader.
•Chance to focus Bangladesh in the global World in
Fashion Arena.
•Skilled nursering School to proof to shine national
dignity.
•To Circulate Huge Money in this Textile Sub-Sector.
WEAKNESSES:
•To chance Monetary stuck-up.
•Not available arbitration to solve any dispute
arises in contract/LC. •No ready Controller to check Financial Loss.
•Still Not any Recovery body to Protect Fund.
•To Find One stop Services
21
Recommendations:
To Increase the EDF for facilitating adequate Import as per requirements.
To adjustment period may extend up to 1(One) Year instead of 6 (six) Months.
To Ensure Cotton Quality before Shipment ,Inspection must be done by Pre-Qualified enlisted Inspection Firms.
At Present this Sub-Sector contribution to GDP is 12%. This may be increased to 24% within Vision 2021.
Fabrics Import may be reduced by increasing Textile manufacturing Quality fabrics Production for backward linked Support to Woven Garments Export.
Key Reference
EPB-Export Promotion Bureau.
BTMA- Bangladesh Textile Mills Association
BKMEA- Bangladesh Knitwear Manufacturers and Exporters Association
BGMEA- Bangladesh Garments Manufacturers and Exporter s Association
BCA- Bangladesh Cotton Association, CDB-Cotton Development Board Bangladesh.
USDA- United States Department of Agriculture
NCC- National Cotton Council of America
ITC- International Trade Center
GDP- Gross Domestic Product
MN-Million
CCI- Cotton corporation of India ,EICA-East India Cotton Association
EFP-Exchange of futures for Physicals,EFS-Ex for Swaps,OFS-Opations on Spreads
PTS- Primary Textile Sector
Q/A
Thanks to All
