India to see drop in cotton cultivation by 15% over low price and lower demand

India’s cotton cultivation is estimated to drop by 20 percent in 2015-16 if low price and lower demand continue to remain will discourage farmers to reduce cotton cultivation, after having witnessed a year of record production. In 2014-15, cotton area under cultivation was around 13 mn hectares about 1.5 mn hectares higher than the previous year.

While global demand for cotton and cotton yarn dropped in recent months, cotton prices also dipped owing to lack of good quality cotton in the market.

In fact prices fell due to several reasons, including oversupply and reduced demand. Add to that, prices also fell due to non-availability of good quality cotton. This has discouraged farmers heavily. If the situation remains more or less the same till April, cotton cultivation for 2015-16 in India could fall by 15-20 per cent, said Arun Dalal, a leading cotton trader and exporter.

K Selvaraju of South Indian Mills Association said that global factors like decline in cotton yarn exports and overall global demand for cotton being low, cotton prices took a hit globally. From an average 90 cents per pound, cotton prices globally ranged between 50 cents and 60 cents per pound in some cases.

Moreover, China also stopped importing cotton that impacted global cotton markets. Also, demand from mills also came down drastically due to reduced exports. All these factors led to fall in cotton prices. If prices do not improve much or global as well as domestic markets do not improve, then there could be fall in cotton cultivation by at least 10 per cent.

This year, cotton yarn exports too have come down, from 140 million kg last year to about 100 million kg this year.

According to International Cotton Advisory Committee (ICAC), cotton cultivation is projected to be down by six percent globally in 2015-16 as low cotton prices are expected to continue through the rest of 2014-15 when farmers in the northern hemisphere make their planting decisions. As a result, world cotton area in 2015-16 is projected down six percent to 31.6 million hectares.

Due to drop in cotton cultivation, the world cotton production is forecast to drop l six percent to 24.6 million tones assuming a world average yield of 777kg/ha, which will be the lowest volume since 2009-10. At the same time, world cotton consumption is likely to see increase by two percent to 24.7 million tonnes, making 2015-16 the first time in five seasons where consumption will overtakes production but this will only be a small reduction in the large cotton stockpile.