Farmers likely to increase acreage under cotton

YarnsandFibers News Bureau 2017-05-03 10:00:00 – Mumbai

With cotton crop able to fetch relatively higher prices in 2016-17 and is expected to sustain remuneration levels in the current fiscal as demand for cotton, especially by mills, is also rising and is likely to result in a consistent fall in year-end stocks of cotton, according to the International Cotton Advisory Committee (ICAC). Farmers are likely to increase acreage under cotton, resulting in higher output going forward.

The total area under cotton globally will rise by five percent to 30.8 million hectares in 2017-18 cotton year (July-June). However, ICAC stated that India's cotton area is forecast to increase by seven percent to 11.3 million hectares in 2017-18, as farmers eye better returns brought about by higher prices and improved yields in 2016-17.

Assuming the yield is similar to the five-year average, production could increase by three percent to a little under six million tonnes.

The Textile Commissioner of India had estimated the yield in 2016-17 at 568.29 kg/hectare. The highest yield was in south India and the overall yield was better than in previous years.

According to Prerana Desai, Vice President-Research, Edelweiss Agri Services and Credit, Cotton has seen a unique season this year. In response to demonetisation, farmers delayed selling their produce and dictated the price throughout the season. As the seasonal price trough did not play out, the mills were caught unawares and missed out on opportunity to make purchases at lower prices.

Farmers in Rajasthan played a crucial role this season. Lower crop along with increased local consumption of cotton in Gujarat increased the raw cotton deficit in Punjab and Haryana, the largest consuming region after Tamil Nadu.

Import parity for mills in the north emerged in March itself, and these mills ended up importing very large quantity of US cotton this season. This has improved their yarn realisation and US cotton may have earned some loyalty in this traditionally non-importing region of India.

Production of about six million tonnes helps India surpass China and US by quite a high margin. China's production is expected to be higher by one percent, at 4.8 million tonnes, the first increase in five seasons.

Farmers in the US are expected to expand harvested cotton area by 12 percent to 4.3 million hectares, and assuming a yield of 938 kg/ha, production could grow eight per cent to four million tonnes, according to ICAC.

Another reason for the global increase in cotton acreage is lower price realisation from soyabean. As a result, farmers switched from soyabean to cotton, according to one exporter.

Imports by China, now the world's third largest cotton importer, are expected to increase by three percent to 987,000 tonnes as sales from that country's reserves are falling. India's exports are projected to decline by 30 percent to 886,000 tonnes.

According to Desai of Edelweiss Agri Services, Year-to-date imports (Oct-Mar) are around 980,000 bales vis-a-vis 450,000 bales during same period the previous year. While mills in the country have been quoted as saying that India will import more than three million bales this season, they are of the view that the pace of import will slow down from here on.

Softening domestic prices has seen import parity disappear for mills in the south, and flatten for mills in north. India imported around 2.3 million bales of 170 kg in 2015-16. and may end up importing a similar or marginally lower quantity this season as well.

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