Fears over cotton pile-up in India

The Cotton Association of India fears that India may be piling up huge inventory of cotton just like China, if the Cotton Corporation of India (CCI) does not take measures to offload its stock swiftly. Maintaining the cotton output at the last estimated level of 38.27 million bales (a bale is 170 kg), Dhiren N Sheth, President, CAI, says the Corporation had procured about 8.7 million bales from farmers as part of the Government’s minimum support price commitment.

Looking at the speed at which CCI is selling the cotton, it is expected that it would be left with a sizeable quantity of cotton by the end of the season (in September). This does not augur well for the country with apprehension of a major support price operation looming large at the start of next cotton season, Sheth adds.

India’s cotton inventory is expected to surge 25 per cent to 7.39 million bales by October from 5.89 million a year earlier. The faulty policy of China led to it holding huge cotton stockpile equivalent to its two year consumption. Though China has stopped procuring cotton from farmers and switched to distributing direct subsidy to farmers from this year, Sheth says it is still sitting on a huge stockpile which it finds hard to dispose. "India needs to learn a lesson from China’s mistake and dispose of the cotton lying with CCI quickly, to avoid getting into a China-like situation," he opines.

According to the latest Government data, the acreage under cotton is marginally lower at 9.9 million hectares against 10.05 million hectares in 2013-14 as farmers shifted to other remunerative crops due to low prices of the fibre. Though the demand for cotton has improved marginally, the prices are almost flat with occasional spurts. Going by trends in commodity futures markets, analysts expect cotton prices to range between Rs 4,200 and Rs 4,400 a quintal in the coming season. This is slightly higher than the minimum support price of Rs 4,050 fixed by the Government

Cotton is predominantly a monsoon or kharif season crop. It is planted from the end of April through September and harvested during the winter. India accounts for about one-third of the global cotton area. Two-thirds of India’s cotton is produced in states like Odisha, Maharashtra, Madhya Pradesh and Gujarat, where much of the crop is rain-fed. North India, comprising Punjab, Haryana and Rajasthan, produces cotton under irrigated conditions and accounts for 15 per cent of total production. Andhra, Karnataka and Tamil Nadu contribute 30 per cent down south.

The latest cotton report released by the US department of agriculture (USDA) suggests India’s cotton output is expected to decline for the second consecutive year to 37.5 million bales in the marketing year 2015-16 mainly due to a likely drop in yields on account of delayed sowing, weather issues and low realisations. For the 2014-15 marketing season (August-July), USDA has forecast cotton output to be 38 million bales, while the government has projected it at 35.3 million bales (one bale equals 170 kg of cotton). India’s cotton output is projected to be 37.5 million bales from 12 million hectares harvested, the USDA report said.

The Cotton Advisory Board, on its part, said the country’s total production during 2013-14 stood at 39 million bales and ICF estimates the production for 2014-15 at around 38.7 million bales. These numbers need to be seen in the light of the recently-released report of the International Cotton Advisory Committee (ICAC), which said the world’s cotton area is expected to decline by 6 per cent to 31.3 million hectares in 2015-16 due largely to lower prices in 2014-15. In India, the cotton area is projected to decrease by 5 per cent to 11.6 million hectares in 2015-16, the report said, adding that, falling prices for competing crops and a modest increase in the MSP may forestall a greater decline. India exported 90 lakh bales of cotton in 2013-14. Exp