Global Cotton Supply Outlook slightly lower than Previous Year; Indian Cotton Crop Size Estimated Higher

Cotton supplies are expected to remain lower globally as compared to last year although the world ending inventory may rise year on year. US Department of Agriculture expects slightly lower global supply. On the other hand, production estimate for Indian crop is seen higher although there are reports of crop damage in the state of Haryana. As of now this damage is not seen as much concerning since supplies are still estimated to be above last year’s production. As per the latest sowing report from Ministry of Agriculture cotton area coverage had reached 129.30 lakh ha area till September 11, versus 126.61 lakh ha area reported during corresponding period of previous year. This translates in to increase in area coverage by 2.12%. Rise in area is being reported from the States of Telangana (5.81 lakh ha), Karnataka (1.04 lakh ha), Punjab (0.99 lakh ha), Haryana (0.36 lakh ha), Madhya Pradesh (0.35 lakh ha), Rajasthan (0.23 lakh ha) and Odisha (0.02 lakh ha). Less area is reported from the State of Gujarat (3.87 lakh ha), Maharashtra (1.58 lakh ha), Andhra Pradesh (0.47 lakh ha) and Tamil Nadu (0.13 lakh ha).  

Cotton prices in the country have stabilized of late due to slower selling interest amongst farmers against cheaper rates. Prices are much below the MSP of cotton at present which also discourages farmers to sell their produce. or season 2020-2021 the government has raised MSP of medium staple cotton by Rs 442 to Rs 9,376 a bale. Also, the MSP of long staple cotton was raised by Rs 468 to Rs 9,903 a bale. Due to improving export outlook for the new season the farmers feel they can earn better prices October 2020 onwards when harvested crops start arriving in mandis.  

In its July estimates, the Cotton Association of India (CAI) had increased its cotton crop estimate for 2020-2021 marketing season. The marketing season of Cotton in India is from October to September period every year. The total cotton supply estimated by the CAI during the months of October 2019 to July 2020 is 392.40 lakh bales of 170 Kgs.( Production includes domestic arrival of 345.40 lakh bales till 31st July 2020, imports of 15 lakh bales till 31st July 2020 and the estimated opening stock as  during beginning of the Season on 1st October 2019).  Meanwhile the total cotton supply till end of the Season i.e. upto 30th September 2020 is estimated near 402.50 lakh bales of 170 Kgs. Each. Last year’s cotton production stood (CAI estimates) near 354 Lakh bales.  

Cotton stock held by spinning mills in their godowns as on 31st July 2020 is estimated at 15 lakh bales of 170 Kgs. each (or nearly 16 lakh running bales of 160 Kgs. each). On the other hand, the stocks held with CCI/Maharashtra Federation, MCX, MNCs, Ginners, etc. as on 31st July 2020 stood at 128.40 lakh bales (or about 136 lakh running bales of 160 Kgs. each) thereby totaling  143.40 lakh bales of 170 Kgs. each. The closing inventory as estimated by the CAI at the end of the Season i.e. as on 30th September 2020 is around 109 lakh bales.  

Latest World cotton production forecast as per this month’s USDA (US Department of Agriculture) is seen at 117.2 Million 480- pound bales versus last year’s production estimate of 121.98 Million 480- pound bales. Similarly, the global ending inventory is expected to be 103.84 Million 480- pound bales versus last year’s ending inventory of 99.4 Million 480- pound bales.