Report Highlights: 

Cotton exports appear to have defied expectations during April, lifting 2013/14 exports during the August-April period to 8.0 million 480 lb bales. As a result, exports are now expected to climb to 8.8 million 480 lb bales before the marketing year ends in three months as demand for competitively-priced Indian cotton remains relatively brisk. Aided by winter rains that facilitated additional pickings following a strong monsoon, MY 2013/14 production is also estimated higher at a record 29.5 million 480 lb bales from a near-record yield of 552 kg per hectare.

Exports Defy Expectations 

MY 2013/14 cotton exports are expected 800,000 480 lb bales higher at 8.8 million 480 lb bales. (11.2 million 170 kg bales) as exports appear to have maintained a torrid pace during April, climbing to nearly 8.0 million 480 lb bales since the start of the marketing year. Indian cotton continues to be competitively priced relative to the Cotlook A index and buyers are reportedly seeking lower-quality, lower-priced cotton. Weather conditions have stimulated additional cotton pickings (as many as five in some areas) and, while supplies are up, quality is reportedly down. Bangladesh, China, Turkey, and Vietnam have all been active buyers of late, while exports to Pakistan have slowed considerably. Exporters are optimistic that exports during May will also be sizeable. 

Is production higher? 

At 29.5 million 170 kg bales as of April 14, arrivals continue to lag the revised 2012/13 pace of 30.8 million 170 kg bales (2012/13 arrival data was revised to reflect a higher production estimate). However, arrivals are well ahead of the 2011/12 pace that led to a record crop. While arrivals can be predictive of final production, the data may become less frequent as the marketing year wears on, making it harder to gauge the pace of arrivals. Having said that, the comparison to 2011/12 arrivals suggests that a higher current-year production estimate falls within the realm of possibility. Additionally, arrivals are maintaining a relatively brisk pace despite a dearth of arrivals in the three cotton producing states in Northern India. There are a number of theories as to why arrivals have been slow there, including the oft-heard refrain that farmers are holding onto their cotton in anticipation of higher prices. However, northern farmers are also reportedly holding onto cotton because an unusually wet winter has made it harder to bring cotton to market, suggesting that there are pent up supplies in the north. 

Winter rains during January and February in Gujarat and Maharashtra, allowed for additional pickings, boosting supplies across the belt where most exported cotton is sourced. Cotton is harvested by hand in India and farmers in some areas obtain multiple pickings from each plant. If winter conditions are suitable, farmers will leave cotton plants in the field for several months. 

Despite brisk exports and consumption, farm-gate cotton prices have declined since January lending support to the notion that supplies are larger than originally predicted. 

In sum, given the pace of arrivals compared to the 2011/12 pace; winter rains leading to more pickings; and the potential for more cotton on farms in the north, production is now estimated 500,000 170 kg bales higher at 29.5 million 480 lb bales. This boosts yields to a near record 552 kg per hectare, but given the performance of the monsoon and winter rains, high yields seem to be a reasonable operating assumption. A key question over the next few months will be whether yields and production are even higher