Post has factored in the expected impact of pink bollworm infestation across Gujarat, Telangana, and Andhra Pradesh that will likely impact yields.

Trade sources in the textile sector indicate that the rise in seed cotton prices is limiting their purchase of cotton, which is in part driven by CCI procurement under MSP operations. However, if CCI would begin offloading the unsold stocks at reasonable prices, mill purchases are expected to increase. Currently, the prices quoted by CCI are much higher than market prices. The strong pace of arrivals is also reflected in cotton seed prices that have fallen by four percent from last month, and by twelve percent since beginning of Indian marketing year 2019/20 (Oct/Sep).

Post estimates MY 2019/20 cotton consumption at 5.4 MMT. Indian seed cotton prices have recovered slightly and increased by 2.4 percent since December 2019 but remain below the minimum support price (MSP). Similarly, cotton yarn prices have risen by seven percent since last month due to increased demand supported by low raw cotton prices improving the margin for spinners. While the recent recovery in cotton yarn market is a positive sign in the short-term, the industry continues to face several issues including slower economic growth affecting long-term fiber demand, tight credit policy affecting working capital for spinners, and low polyester prices directly competing with raw cotton.

Post estimates MY 2019/20 exports at 870,000 MT. Month on month shipments significantly increased as new crop arrivals were shipped primarily to Bangladesh, and small volumes to China and Indonesia. This is the second straight month of increasing cotton exports indicating signs of revival. Similarly, cotton yarn exports for first four months of MY 2019/20 are 24 percent lower than last year, but the month on month shipments increased by 16 percent as demand for yarn remains firm with major export markets being China and Bangladesh followed by Egypt. Local contacts report that prospects may improve for Indian cotton exports to China.

Post estimates MY 2019/20 imports at 436,000 MT. The pace of imports has slowed down as new crop arrivals have picked up. Imports continue to be led by shipments from the United States, but there has been a steady increase in imports from Brazil.

Source: USDA Gain Report January 2020