Cotton Trading NSEL NSEL Cotton Meet 2008 Mumbai

2. Agenda About Karvy Comtrade Trading at NSEL Cotton: An Introduction Trends Global Domestic Textile Industry Price Analysis & Forecasts

4. Our Commitment to Quality

6. Products & Services

8. Our Research Coverage Magazine Karvy Comtrade�s �Invest & Harvest� Monthly articles Commodities & Derivatives Magazine Minerals and Metals Karvy the Finapolis Karvy Bazaar Baatein Daily reports www.thebulliondesk.com Our Reports are available on BLOOMBERG with key word KCTL <GO> & Reuters Knowledge Print & Electronic media coverage for Views on commodities Business Standard, Businessline, EconomicTimes etc., Newswire18, Bloomberg, Reuters, CNBC, NDTV Profit, Zee business etc.,

16. Cotton � The Recent Trends Year 2008 saw roller coaster ride in Cotton prices The bench mark ICE (NYBOT) futures showcased higher volatility by trading in the range of 92-36 cents per pound Domestic cotton made all time highs of Rs.29000 - 29500 per candy in third quarter and fell to 21000 in November Economic slowdown and financial crisis resulted in consecutive quarterly fall at ICE Lower output forecast across world failed to provide any support to prices Domestic textile industry facing crisis over higher MSP and lower export demand

17. About cotton Accounts for 40 percent of total global fiber production Discovered more than 4,000 years ago Cotton fiber is a unicellular seed hair composed of basically 92-95% of pure cellulose An important fiber crop and one of largest globally traded commodity Mostly harvested in second half of the calendar year Cotton products: Fiber and seed Fiber : Textiles Seed: Oil extraction (Edible oil) and Cake (cattle feed) Classification � based on fiber length Emergence of Bt cotton

18. Cotton-Global trends World Area and Production averaged at 33 million hectares and 23 million tonnes in this decade Highest output was in 2006-07 at 26.56 million tonnes China is largest producer (32%) and importer (30%) US is third largest producer (12%) and largest exporter (35%) India has overtaken US in terms of production in 2007-08 to become second largest producer (22%) Production is in declining trend in US and rising in developing countries

19. World Area and Production

20. Major Cotton producers

21. World cotton scenario

23. India Cotton Area and Production

24. India cotton scenario

25. Growth in Cotton

26. Region-wise cotton output (2008-09*)

27. A Brief on Indian Textile Industry Contributes to 4 % of GDP and 14 % of industrial production and 16 % of total exports earnings Cotton constitutes 60% of textile consumption Employment to over 15 million people End of Multi Fiber Agreement (MFA) in 2005- India's share of exports to the world expected to increase from the current 4 per cent to around 7 per cent by 2012 High input cost and low returns due to higher raw cotton prices and weak export sales

28. Domestic cotton price seasonality

29. Yearly average prices and % change

30. Price Correlation Matrix

31. Minimum Support Price (MSP) Increased by 40-48 percent for 2008-09 MSP for Shankar � 6 fixed at Rs 2850 per quintal compare to Rs2055 Better price to farmers at a time of higher input costs and incidents of suicides Farmers prefer to sell to Government procurement agencies rather than ginning mills Double blow to the mills � Higher MSP and lower exports Ginning mills are running below 50 % of their capacity Efforts to protect the interest of mills � Government intervention

32. Arrivals and procurement in current season Daily arrivals are around 1.5-2 lakh bales and it may extend till January end As per CCI, total cotton arrivals till December 13th were 85.88 lakh bales compared to 106.6 lakh bales for the same period of last year CCI has procured about 30 lakh bales and targeted to procure 100 lakh bales in this season Likely to face storage problems with huge quantity of purchase and may go slow According to media quote, CCI may suffer loss of Rs2065 crores for procurement

33. Cotton forecasts for 2008-09 � ICAC as on 1st December Global production expected to decrease by six per cent to 24.6 Million tonnes Global trade is likely to fall by 12 per cent to 7.3 million tonnes World imports are likely to fall by seven per cent to 5.4 Million tonnes Chinese imports are likely to fall by 24 per cent to 1.9 Million tonnes Global mill use is expected to fall by 6% to 24.9 Million tonnes

34. USDA forecasts as on 11th December

35. Price outlook for Indian Cotton Current market price: Rs 21500-21600 per candy Short term(1-2 months) � Weak - Rs18500 -19000 per candy Long term (6-8 months) � Strong - Rs26000 per candy

36. Short term Outlook - Bearish Weak demand from ginning mills and textile sector Low export demand and less parity with global price Higher arrivals in domestic markets � around 2 lakh bales per day for another one month Falling global cotton prices

37. long term Outlook - Bullish Higher MSP � 40-48% rise Anticipation of revival of the global economy � measures taken by Governments Global shortage of cotton � World output to decline by 7.47% US output to decline by 29.19% India can fulfill the global shortage Weakening Rupee Declining arrivals � from February onwards