The annual cotton output in India might drop 12% to the lowest in 9 years as inadequate rainfall in the top two producing states has cut crop yields, potentially reducing exports from the world's leading producer.
And due to lower cotton consignments from India, the US, Australia and Brazil will increase cargoes to leading Asian buyers including China and Pakistan. It might also endorse global prices that have fallen 16% since hitting a 4- year peak in June.
According to estimates, India can produce 32.5 million bales in the marketing year 2018-19 that started on Oct. 1; the lowest since 2009-10 - because farmers in Maharashtra and Gujarat have reported poor yields, informed Chirag Patel, Chief Executive at major exporter Jaydeep Cotton Fibres Pvt Ltd.
Rains in both the states, which account for over half of country’s cotton production, were almost a quarter below normal in June to September. Patel also said that "Many growers had to deracinate plants after first cotton picking as there will not be a second or third picking like every year”.
State-run Cotton Advisory Board said, India produced around 37 million bales in 2017-18 and was estimated to yield 36.1 million bales in 2018.
Patel added that "In spite of higher prices, supplies are not lifting up and hence the crop is lower than expected".
President of Cotton Association of India (CAI), Atul Ganatra said fresh season cotton supplies generally start from October and peak in November and December. But spot supply in the last 2 months reached just 7 million bales compared to 10 million bales in the same period last year. He mentioned that pink bollworms also slap plantation in Maharashtra.
Earlier in June, dealers were hoping India to export at least 10 million bales amid high demand from China after trade dispute with the US.
But smaller crop size will restrict surplus for overseas sales and raise local prices, told managing director of exporter D. D. Cotton, Arun Sekhsaria. He said, "We could export 5 -6 million bales. Export demand is expected to lift up in coming months as Indian cotton is economical than other origins”.
It must be noted that the Indian cotton is offered about 84 - 85 cents per lb, cost and freight, to the buyers in Vietnam and Bangladesh, against around 90 cents for those from the US and Brazil.
In the current season, traders have contracted to export around 2.5 million bales and have shipped around 1 million bales, said Ganatra of CAI.
