Recently, the U.S. Agricultural Counselor in Indonesia released a report stating that Indonesia’s cotton production is expected to decrease to 5,400 tons this year, and many reasons have also led to a poor outlook for the country’s cotton consumption and imports.
The Indonesian Meteorological Department predicts that the El Niño climate will affect the country in the first half of this year, and insufficient rainfall in the dry season may lead to a decrease in cotton yields. Because of this, the Agricultural Counselor lowered Indonesia’s cotton production for this year and next year to 0.54 million tons and 0.5 million tons respectively.
As the world’s ninth largest textile exporter, Indonesia’s textile exports in 2013 were US$6.4 billion. Despite shrinking demand for textiles in the European market, Indonesian textile exports to Japan increased by 35% year-on-year. From January to November last year, the cumulative export volume of Indonesian cotton yarn reached 138,000 tons, compared with only 77,000 tons in the same period last year. The depreciation of the rupee can be regarded as a magic weapon to stimulate exports. However, since January this year, the Indonesian rupiah has continued to appreciate, coupled with the weakening of international cotton yarn prices, cotton imports and consumption have been affected.
China’s cotton control policy will lead to abundant cotton resources in the international market, but domestic cotton prices in Indonesia continue to remain strong, while yarn prices have fallen due to currency appreciation. On March 17 this year, the Indonesian rupiah was 1,272 against the U.S. dollar, compared with 12,227 in January. In order to make profits, cotton spinning mills can only wait until cotton prices fall before purchasing. Indonesian cotton consumption is expected to be 577,000 tons this year. Since the price comparison between cotton yarn and man-made fiber yarn is not advantageous, Indonesian cotton consumption may further decrease in the future.
