India’s cotton output is likely to decline by 11 per cent this year, due to crop damage in major producing states such as Maharashtra and Gujarat. Almost half the country''s cotton comes from these two states.
Analysts estimate total cotton output at 32.5-33 million bales (of 170 kg each) for the crop year October 2018–September 2019, down from 36.5 million bales the previous year.
Premier industry body, the Cotton Association of India(CAI), however, forecast India’s cotton output at 34.3 million bales in its October estimates for the current season.
November rainfall, which is known as northeast rainfall season in trade parlance, is still awaited and keeps hope alive for cotton consumers. Deficient and erratic southwest monsoon this season followed by a long dry spell this winter season has impacted standing crop. While the first cycle of cotton picking is over, the second and third cycles are likely to get impacted badly due to spoilage of flower buds.
“Rainfall in Maharashtra''s Marathwada region was much below average this monsoon season (June–September 2018). While overall rainfall in Gujarat was 40 per cent below the long-term average (LPA), the southern part of the state eventually received excess rainwater and the northern region very little rain. Since Saurashtra contributes 55-60 per cent cotton output in Gujarat, the drought in this region hit the crop badly. We, therefore, estimate an output of 32.5-33 million bales this year,” said Biren Vakil, an analyst with Motilal Oswal Financial Services Ltd.
In case November rainfall is normal, cotton flowers can recover some lost yield in the third cycle, and curtail the decline in cotton output substantially this year, Vakil added.
Noticing the dry spell, CAI has revised the crop estimate for Gujarat by 200,000 bales,Maharashtra and Karnataka by 100,000 bales each and Odisha by 75,000 bales.
“Huge cracks have developed in land across Saurashtra due to the lack of soil moisture, following heat waves in the region. Therefore, second and third picking of cotton flowers looks impossible. Farmers have started uprooting plants and clear the field for rabi crop sowing. So a sudden spike in cotton prices looks possible any time soon,” said Atul Ganatra, President, CAI.
Meanwhile, the benchmark variety of cotton, Shankar 6, has been trading at around Rs 13,000 a bale for quite some time now.
According to the Second Advanced Estimate of CAI, total cotton output in Gujarat would stand at 8.8 million bales this year, down from 10.5 million bales the previous year. Output in Maharashtra is estimated at 8 million bales this year versus 8.3 million bales last year, while that in Andhra Pradesh is forecast to decline to 1.6 million bales from 1.85 million bales.
Interestingly, India’s cotton season started with a marginal 1.5 million bales this year compared to 2.3 million bales last year. This year there is the likelihood that the demand from China, a major consuming country, is set to rise following the high import duty levied by its perennial supplier United States under the ongoing trade war. This means India’s cotton exports are likely to remain firm this year.
“Rising demand and lower output may trigger a sharp price rise this year which may dent textile mills’ profit margins in coming quarters,” said an industry expert.
Source: The Business Standard, India Saturday, 17 November 2018