Report Highlights: 

Official statistics reveal marketing year (MY) 2014/15 planted area reached a record 12.7 million hectares. Delayed rains and few alternatives prompted farmers to expand cotton area. The MY 2014/15 production forecast is 30.8 million 480 lb. bales. Weak prices have prompted the Cotton Corporation of India (CCI) to begin procurement under minimum support price (MSP) operations. MY2013/14 data have been revised based on official statistics.

Slow Arrivals 

For MY 2014/15, new crop arrivals have reached around 500,000 170 kg bales with around 215,000 170 kg bales arriving in northern India. The price for seed cotton continues falling as the pace of arrivals continues accelerating. Peak arrivals are expected to start between mid-October and early November. 

As of September 25, CCI reported marketing year (MY) 2013/14 cotton arrivals reached 38.6 million 170 kg bales (30.2 million 480 lb bales / 6.5 mmt) lending support to the notion of a larger crop over the previous year. For MY 2013/14, total arrivals as a percentage of the total production estimate have reached 97 percent. 

Record Area and Production Continues 

FAS Mumbai has revised the MY2014/15 planting area to 12.7 million hectares based on official statistics, dated September 26, from the Ministry of Agriculture. This is 8 percent higher than the MY 2013/14 crop area. The normal area (3 year average) for the same period is 11.1 million hectares. The area increase is attributed to delayed rains which reduced alternatives and prompted farmers to expand cotton area. FAS Mumbai revised the MY 2014/15 production to 30.8 million 480 lb. bales (39.5 million 170 kg bales / 6.7 mmt). The cotton yield is estimated at around 530 kg per hectare, marginally higher than the five year average of 525 kg per hectare, but lower than last year’s yield of 577 kg per hectare. On October 12, 2014, the Cotton Advisory Board (CAB) forecast a record production of 40 million 170 kg bales (31.2 million 480 lb. bales / 6.8 mmt) for MY 2014/15. CAB has revised its MY 2013/14 production 800,000 170 kg bales higher to 39.8 million 170 kg bales (31 million 480 lb. bales / 6.7 mmt). 

Trade 

The current FAS Mumbai MY 2014/15 export forecast is 6 million 480 lb. bales (7.6 million 170 kg bales / 1.3 mmt). Although export shipments since August have been relatively slow with lower Chinese buying, Bangladesh and Pakistan emerged as top export destinations. Trade sources anticipate continued export sales as forward contracts are delivered and Indian remains competitive in what is being dubbed a buyer’s market. Indian ex-gin cotton prices are on par with the Cotlook A index as increasing global stocks lower thin margins for exporters. Export shipments for MY2013/14 reached 9.2 million 480 lb. bales (11.8 million 170 kg bales / 2 mmt). 

The MY 2014/15, import estimate is unchanged from the USDA forecast as large domestic supplies are expected to offset any seasonal import substitution as the season progresses. Import shipments in MY 2013/14 reached 869,000 170 kg bales (680,000 480 lb bales / 147,000 mt). 

Domestic Consumption 

The FAS Mumbai MY 2014/15 consumption estimate is 23.5 million 480 lb bales (30 million 170 kg bales/5.1 mmt). Although monthly consumption in August was 2.4 million 170 kg bales (1.8 million 480 lb bales / 408,000 mt), trade sources indicate that mill buying September onwards has remained weak on account of poor demand for raw cotton and cotton yarn, affecting ex-gin margins. Trade sources indicate that textile mills have built up considerable inventories and are limiting buying of raw cotton in in anticipation of declining prices. Small to medium sized mills are stocking cotton and yarn at rates of 15-20 days of consumption and immediate requirements. 

FAS Mumbai forecasts average mill consumption (i.e. use) to be around 2.35 million 170 kg bales in MY 2014/15. Use is expected to increase over the prior year, but is generally forecast at minimal growth unless significant changes occur in the market. Should this occur, the spindling capacity and vertical integration that trade sources report is taking place should allow the Indian cotton and yarn sector to capitalize on any changes. FAS Mumbai’s MY 2013/14 consumption estimate has been revised 500,000 480 lb. bales lower to 23 million 480 lb. bales (29.8 million 170 kg bales / 5 mmt) based on consumption data by the textile commissioner’s office. 

MSP Operations Underway 

The CCI has initiated the procurement of MY2014/15 raw cotton under minimum support price operations in selected districts in the state of Telangana. Trade sources forecast that around 5 million 170 kg bales (3.9 million 480 lb. bales / 850,000 mt) could be procured. MSP operations are expected to be concentrated in southern states of Telangana, Karnataka, Andhra Pradesh and the central state of Maharashtra. Sources report that CCI anticipates procuring around 3.5 million 170 kg bales (2.7 million 480 lb. bales / 595,000 mt) from southern states and 1.5 million 170 kg bales (1.5 million 480 lb. bales / 255,000 mt) from the central cotton growing region. 

Cyclone Nearly Strikes Again 

India’s southern cotton growing state of Andhra Pradesh was hit in early October by a severe cyclonic storm ‘Hud Hud’. According to the state agriculture department, cotton growing regions evaded significant damage to the crop as the cyclone moved northwards of the major cotton growing districts affecting primarily horticulture crops such as banana, and agricultural crops such as maize and sugarcane. Area affected was the East Godavari region where planted area for cotton is estimated around 16,800 hectares, but the damage to the crop is being assessed by the state government. 

A Brief Note on 2013/14 PSD Estimates 

FAS Mumbai has revised the MY 2013/14 trade and consumption data to reflect the DGFT and textile commissioner’s data respectively. The MY 2013/14 production reflects the latest CAB estimate