No major change in cotton sowing area but yield may rise

Cotton could spin a different story this season starting October with a higher yield expected though there is no major change in coverage. Factors such as exports and prices could, in fact, determine the route map for next year.

The cotton scenario is beginning to undergo changes with China switching its strategy by importing more hosiery yarn. But Beijing will continue to import cotton as it is still the world’s biggest spinner.

As regards the crop status, with bountiful rains and favourable weather across all the growing areas, a cotton crop higher than last year is likely this season.

According to the Ministry of Agriculture, the area under cotton so far is marginally down at 113.16 lakh hectares (lha) against 113.46 lha during the same period a year ago.

Production could rise at least 10 per cent and the Cotton Association of India has already pegged it at 372 lakh bales (of 170 kg each).

“We have had good rains in all the cotton growing States. Though there is a decline in area by 2-3 per cent in States such as Maharashtra, the overall prospect for cotton seems good,” said S.P. Oswal, Chairman and Managing Director of Vardhaman.

“Plantings are maintained at the same level as last year. But the timely monsoon showers will ensure a better yield,” said A. Ramani, an industry analyst. There could, however, be some problems in Andhra Pradesh and Maharashtra due to excess rainfall.

“We will have a good crop compared with last year. Plantings are on in some States, so we have not made any estimate,” said D.K. Nair, Secretary-General of Confederation of Indian Textiles Industry (CITI).

“Production may decline in Maharashtra as farmers have reportedly shifted to other profitable crops such as soyabean.

“However, rise in acreage in Gujarat and better rainfall may lead to overall increase in production in this year,” said Chowda Reddy, Senior Research Analyst (agri commodities) of JRG securities.

Ramesh Viswanathan, Chief Operating Officer of Nuziveedu Seeds, said cotton would have lost about 5-6 per cent of the sown crop area this year. The monsoon has been good in the cotton growing areas.

In such a scenario, if the yield is good, it will compensate the lower sowing.

He, however, said that more clarity on yield would be known only after two months.

Viswanathan said other crops have cut into cotton area.

“In the North, the area for guar has gone up. In Maharashtra and Madhya Pradesh, soyabean has gained. Groundnut area has gone up in Gujarat,” he said.

Overall, the maize acreage has grown increased by 8-9 per cent. Guar could have gone up 10-15 per cent, all gaining at cotton’s cost.

In Andhra Pradesh, the area under cotton is likely to cross the 20-lha-mark. The State, which grew cotton on a record 22 lha last year, was expecting the acreage to drop to the normal level of 16-18 lha.

The area, however, increased sharply following good rains in the Telangana region, which grows maximum cotton.

In Maharashtra, the coverage has slipped by two lha compared with last year, followed by Gujarat which witnessed a dip of one lha. On the other hand, Haryana and Rajasthan have reported a higher acreage of two lha, while Punjab’s sowing has stayed put at the last year’s levels of 5.5 lha. Trade sources put production in Gujarat at 115 lakh bales.

Abundant stocks of seed have come in handy for the farmers.

The seed supply chain has carried over eight crore packets (of 450 gm each) at the beginning of the season against the estimated demand of four crore packets.

Though cotton prices are currently near three-year high, they could drop once the new arrivals begin flowing into the market.

“Our cotton is price higher than comparable variety in the global market. Our Shankar-6 is quoted at 97-98 cents a lb against 88-92 for a similar international variety,” said Ramani.

Prices have zoomed due to low carry-forward stocks and export demand.

“Our prices are usually higher at this point of time since arrivals are over. At the same time, transactions will also be low since most mills would have completed their purchases,” said Nair.

“This year, the new crop could fetch lower price than last year at the beginning,” said the CITI official.

Chowda Reddy said that prices are likely to come under pressure once harvesting starts in October and could be low during peak arrivals in January-February.

Exports hold the key to the price this season and the crop’s future.

“We will have to wait to see what the Chinese policy is towards cotton export,” said Nair.

“China still needs good quantity of cotton as it as huge spinning capacity. The only problem for importers there is the 14 per cent value-added tax on cotton imports,” said Ramani.

Still, cotton exports could match quantity of this season that ends this month. Cotton shipments have been estimated at 70 lakh bales against 128.1 lakh bales last year.