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With outlook weak, cotton farmers eye higher prices.

Published: March 13, 2019
Author: TEXTILE VALUE CHAIN

Poor rain seen hitting yields this kharif in key growing regions across Central, South India.

Deficient rains in cotton growing regions will hamper the yield for the kharif 2018-19 season, resulting in lower overall output of fibre crop. Farmers, therefore, have pinned their hopes on increased cotton prices to make most from this kharif season.  Gujarat, Maharashtra and Karnataka, which produce about half of the country’s cotton, faced water shortage due to erratic monsoon during the sowing period. The Bt seeds, used in most of the cotton fields, require adequate water. A deficient rainfall has adversely affected the yield ofBt cotton. Farmers in Gujarat – the largest grower of the fibre crop – fear picking cycles to come down from normal 4-5 to merely one or two this year. But they seem to be planning to make most fromthese one or two picking cycles by selling their crop when it is at its peak. “The plants have started drying up. The soil has no moisture and there is no water available for irrigation. There is no possibility for plant to survive after first picking. Most of the farmers in our region have taken at the most two pickings,” said Jagdishbhai Dudhat, a farmer in Amreli district, which has the largest area (4,02,200 ha) under cotton in Gujarat. “Some may sell their crop all at once, while some are releasing smaller quantities to take advantage of higher prices,” he added.

Bullish turn.
The price sentiment has already started turning bullish sincelast month, with prices hovering in the range of 21,900-22,500 per bale of 170 kg ginned cotton of 29 mm quality at Rajkot market. This is about 20 per cent higher than last year. The Centre, in its first advance estimate in September 2018, projected lower cotton crop at 325 lakh bales (each of 170 kg), about sevenper cent lesser than 349 lakh bales estimated in fourth advance estimate for 2017-18. Also, the carried over stock from the 2017-18 season was estimated to be one of the lowest in at least five years, which is further fuelling prices. The Cotton Association of India (CAI) has projected total cotton supply for 2018-19 upto September 30, 2019 at 390.25 lakh bales, including opening stock of 23 lakh bales and imports of 24 lakh bales, higher by nine lakh bales compared 15 lakh bales estimated for 2017-18. The trade, however, believes that the crop will be lower than last year at major growing states (West and South), but will get compensated by a possible growth in the Northern region. “The arrivals are about 30 per cent less this year as against what we saw around same time last year. There is a question if this is because of a smaller crop or farmers are holding back the produce? But there is no reason for farmers to hold the stock because they are getting good prices this time,” said Atul Ganatra, President, Cotton Association of India (CAI) – apex cotton trade body. However, Ganatra stated that there is no clarity at present. “We fear commenting anything about the crop right now, because yield is definitely going to go down in Saurashtra, Marathwada and half of Karnataka. But on crop prospects, we would wait for another 15 days before giving our estimate about the current crop situation early December,” he added. The arrivals have been thin at about 41 lakh bales so far as on November 15, which was about 58 lakh bales around same time last year. Ginners, however, believe that farmers are deliberately holding back stocks in anticipation of good prices. Prices of kapas or raw cotton have moved above the MSP levels and are currently hovering around ₹5,700-5,800 per quintal across various markets. The Centre had increased the MSP by 26 per cent to ₹5,450 per quintal for the 2018-19 season.

“Farmers are expecting prices to touch 6,500-7,000 a quintal in the buzz of the short crop. Which is why they are holding back the stocks. Most ginning mills are unable to operate at full capacity even in this peak season because there is less supply in the market,” said Anand Popat, a cotton trader from Rajkot.

 

Robust exports.
As per trade estimates, arrivals hover around 1.5 lakh bales daily, which caters to the mill demand of 90,000 bales and export demand for 25,000 bales. The export demand has been robust for the past two months. According to Ganatra, about 300,000 bales was shipped in October, while November will see exports of about 7-8 lakh bales. The shipments are mostly to Vietnam, Pakistan and Bangladesh, withsmall quantities going to China. “We have not been able to tap the US-China trade war advantage so far. Things depend on the Xi-Trump meeting later this month. If the talks fail, Chinese importers will turn to India and we will see large exports to China,” Ganatra added. Meanwhile, another Cotton body, Indian Cotton Federation (ICF) released its own cotton crop estimate for 2018-19 at 373 lakh bales of 170 kg each. “Cotton Advisory Board, which surveys and announces the crop situation had not met for a long time and in the absence of an official estimate or report, there was a great amount of uncertainty regarding the crop situation, creating hardship for trade and the spinning industry,” said J Thalasidharan, ICF President. ICF further noted that there has been no major pest menace and the pink boll worm was well controlled.

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