Despite speculations that the cotton yield will be the worst in 12 years, the industry feels that there will be no shortage of the same with price also not becoming an issue. Due to various factors, cotton prices are likely to remain steady and range bound.
The Cotton Advisory Board (CAB), had estimated the cotton crop to be 361 lakh bales on 22nd November 2018. However subsequently based on the arrivals and crop situation, Confederation of Indian Textile Industry (CITI) feels that the cotton crop may go as low as 343 lakh bales. It added that drought in many cotton growing regions of Gujarat, a few regions of Maharashtra and a few areas in other such states had affected the cotton yield. However, CITI assured that the situation is under control.
“India has a smaller crop size this year in comparison to last year, the cotton supply position is very comfortable with a big ending stock of 40 lakh bales. But thanks to a big opening stock, smaller exports and large imports, the production deficit is well covered. CCI has also started selling its stock, which will further increase liquidity in the cotton market.” – Sanjay K Jain, Chairman, CITI
The industry feels that there is a great amount of uncertainty regarding the estimation of cotton crop situation in the country causing great hardship for value added textile industry, especially for the spinning segment. There are rumours doing the rounds in the main stream media indicating a very low crop estimation which is creating chaos in the market and prompting people to stock cotton in anticipation.
As far as price is concerned, prices were high in the start of the season, but later fell by 10% due to good availability of cotton in the market. The fall was limited due to the high MSP levels that gave confidence to stockists that market cannot fall beyond a point. Also hopes of China-US trade disputes settling down soon, has led to the sudden spurt in prices despite an appreciating rupee. This rise has been partly supported by the increase in international prices, however, Indian prices have increased much more (12% in just over a month) which is due to the news floating around that India will be severely short of cotton.
CITI is fully confident that India will have no shortage of cotton in 2018-19 despite an all-time low yield.
As far as crop situation for next year is concerned, the highly remunerative cotton prices during the current year and the monsoon projection would induce the Indian farmers to prefer to grow more cotton.
International Cotton Advisory Committee (ICAC) the apex organisation of Cotton in their report for April 2019 have projected an increase of 6% in global production for 2019-20 at 27.6 million tons. It also projected a higher ending stock for 2019-20. Due to these factors, cotton prices are likely to remain steady and range bound. Early monsoon and import arrivals in India may create downward pressure on cotton prices from June 2019.