India. Cotton Update. Jun 2014 June 26, 2014
MY 2013/14 production is estimated 1.0 million 480 lb bales higher at 30.5 million 480 lb bales. Cotton arrival data continues to support a larger crop estimate, especially across the large cotton producing states of Gujarat and Maharashtra. Exports are also estimated higher at 9.2 million 480 lb bales as China continued to source cotton during May. A stronger rupee has helped to push Indian cotton prices above the Cotlook A index, which, coupled with the end of the marketing year, suggests that the 2013/14 export juggernaut will start to wind down. 2014/15 cotton planting has begun across irrigated northern India and is proceeding at an average pace. The rest of India awaits the start of the monsoon in order to begin planting.
Production Continues to Surprise
Marketing year (MY) 2013/14 production is estimated 1.0 million 480 lb bales higher at 30.5 million 480 lb bales (39 million 170 kg bales). Farm-gate cotton prices have continually declined since January, despite robust domestic mill consumption and strong export shipments, lending support to the notion that supplies are larger than originally predicted. Cotton yield is estimated at a record 568 kg per hectare surpassing the previous record of 553 kg per hectare in MY 2007/08. Record production appears to be a reflection of timely and well-distributed rains during the 2013 monsoon, especially across the major cotton producing states of Maharashtra and Gujarat.
On May 27, MY 2013/14 cotton arrivals, as reported by the Cotton Corporation of India (CCI), had reached 34.9 million 170 kg bales (27.2 million 480 lb bales/5.9 mmt) compared to 34.25 million 170 kg bales (26.8 million 480 lb bales/5.8 mmt) a year ago. Despite slow arrivals in the north and Andhra Pradesh, arrivals have reached what is likely the highest level ever for the middle of May. It is still not clear if the pace of arrivals will accelerate in the North. Unusually wet weather over the past few months reportedly delayed deliveries and farmers have been busy with the wheat harvest and the start of summer planting. Farm prices there have dropped over the past few months, suggesting that supplies are available or demand is weak. Weak demand seems an unlikely cause given current healthy spinning and ginning margins, but time will tell if more cotton is lying in wait on northern farms.
In MY 2013/14, CCI has procured a total of 450,000 170 kg bales (351,000 480 lb bales/76,500 mt) with 400,000 170 kg bales (312,000 480 lb bales/68,000 mt) procured under commercial operations, and 50,000 bales (39,000 480 lb bales/8,500 mt) procured under support price operations in Andhra Pradesh.
2014 Planting Begins
On May 28, 2014, the planted area under cotton as reported by the Ministry of Agriculture was around 1.16 million hectares, similar to MY 2013/14, but 12 percent higher than MY 2012/13 crop season. The normal area for the same period is 1.04 million hectares. Virtually all planting is taking place in the irrigated north as the rest of India awaits the start of the monsoon. Sowing in Punjab has reached 400,000 hectares. Sowing in states of Haryana and Rajasthan has reached 531,000 hectares and 50,000 hectares respectively.
Exports for MY 2013/14 have been revised to 9.2 million 480 lb bales to reflect the strong pace of shipments that has continued in May. May exports shipments are estimated around 550,000 170 kg bales (429,000 480 lb bales / 93,500 mt), with China remaining the top export market with almost 60 percent share of exports. Bangladesh and Vietnam were the other export destinations. MY 2012/13 export estimate has been revised to 7.75 million 480 lb bales from 7.7 million 480 lb bales to reflect updated official data. Indian ex-gin cotton prices are now higher than the Cotlook A index as the rupee has strengthened in the last month and reduced the thin margins for the exporters. Import estimates remain unchanged.
The MY 2013/14 consumption estimate has been revised 500,000 480 lb bales higher to 23.5 million 480 lb bales. With mill consumption remaining robust and average consumption remaining around 2.4 million 170 kg bales since beginning of MY 2013/14 (Aug/Jul), consumption is expected to remain strong in MY2013/14. Ginners are making good margins as seed cotton prices remain low and ex-gin prices strengthen.
High Density Planting Systems (HDPS)
In an effort to improve crop yields, the Government of India has undertaken trials of non-bt varieties under the HDPS system. Planting trials are ongoing on a smaller scale for rain-fed regions of 10 cotton growing states (Haryana, Punjab, Rajasthan, Gujarat, Madhya Pradesh, Maharashtra, Andhra Pradesh, Odisha, Karnataka and Tamil Nadu) to improve and sustain cotton yields on marginal soils. Farmer assistance is being provided up to Rs. 9,000 ($150) per hectare to cover the input costs (seeds, fertilizer, micronutrients, bio-pesticides, seeds of inter-crops, and natural insect control). In Punjab, the state government has announced a proposed plan for crop diversification, providing an incentive of Rs. 4,000 ($66) per hectare to farmers for switching from paddy cultivation to cotton under HDPS model. This scheme is only operational in selected districts on a trial basis, but points to what may be increased future efforts to give farmers incentives to shift out of rice production in northern India