India likely to emerge as world’s no.1 cotton grower this year

India likely to emerge as the world’s No 1 cotton grower this year which will be for the first time in over 30 years, pushing China from the top spot, due to China’s unusual shift in global supplies amid ambiguity over Beijing’s farm policy, said US government said on Thursday.

It also comes as China’s textile industry loses its competitive edge with soaring labour and raw material costs forcing some yarn makers to shift production overseas. The estimate also marks the first official nod from the USDA, whose crop estimates are often used as a benchmark across global agricultural markets , to an inflection point in world cotton supply and demand.

If the projections by the US Department of Agriculture (USDA) are accurate, it will mark the end of China’s dominance of the global cotton market just as Beijing scraps its stockpiling program. The state reserve’s purchasing has supported the country’s farmers and boosted global prices for the past three years.

The switch by the two top growers had been expected after Chinese farmers cut plantings amid uncertainty over the state support program and a planting frenzy in India since August after a late monsoon favoured growing conditions. But shrinking local output will force China’s mills to import more foreign supplies once they have eaten through inventories that have swelled to over 60 million bales.

Peter Egli, director of risk management at British merchant Plexus Cotton Ltd said that they are at the beginning of this transition where China will use its stocks , and in four or five years, they may become a big net importer again.

While China’s acreage is expected by many traders and analysts to be on a long-term downtrend, farmers in India may be protected by government support programs. In its report on Thursday, the USDA hiked its estimate for India by 1 million bales to 30 million 480-lb bales of cotton for the 2014/15 crop year that began on August 1.

That would be down from the country’s estimated 2013/14 output of 31 million bales, but high enough to propel the country into top spot for the first time since USDA records began in 1966. China, which has been the largest producer for over 30 years, is projected to cut output for a second straight year with output of 29.5 million bales this year, down from 32 million bales last season.

In the 2005-06 season, India had surpassed the United States as the world’s second-largest producer.