India likely to harvest 40 million cotton bales this year once harvesting begins next month, which will be 8% higher than a year earlier and the highest harvest on record.
Lower-than-normal monsoon rains early in the June-through-September rainy season convinced many farmers to switch to planting cotton, which needs less water to grow. But the rains returned late in the season so now India is likely to have a bumper crop.
India, the worldâ€™s second largest cotton producing country is facing a cotton glut this year as it looks like the farmers misread the global markets and the local weather.
India with excess cotton may have trouble finding buyers for all that cotton as the biggest consumer of its cotton exportsâ€“Chinaâ€“has had been cutting back on its imported cotton consumption.
Chinaâ€™s economic growth has been slowing which has lowered its need for cotton. Meanwhile the Chinese government has been releasing stockpiled cotton on to the market, hoping to help wean its companies off of imported cotton.
According to Ujwal Lahoti, deputy chairman of the Mumbai-based Cotton Textiles Export Promotion Council, lower demand from China will mean than Indian cotton exports will likely decline by more than 30% this year to as low as 8 million bales this year.
India will have to find new buyers for its cotton in Bangladesh, Vietnam and Pakistan but itâ€™s unlikely to find enough buyers.
Shirish Shah, the Mumbai-based director of the Cotton Association of India said that the excess cotton this year could hurt global and local prices. Moreover, the Indian government, which buys set minimum price from the market, may also be forced to buy as much as 4.5 million bales from the market, building a huge government stockpile that could weigh on future prices
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