Area and Production

The FAS Mumbai all India cotton yield estimate of 490 kilogram per hectare is three percent lower than the yield estimate for the 2017/18 crop. The planted area of 12.35 million hectares is based on sowing reports of various cotton-growing states. The lower yield estimate in the states of Maharashtra and Gujarat are based on deficit rains. In addition, government advisories have reported the incidence of pest and diseases, mostly in irrigated cotton, but the overall number is low.

Farmers are expected to do minimal (e.g. 2-3) pickings, although the duration between pickings might be longer than normal as seed cotton prices have been holding above minimum support price (MSP) rates since the beginning of the harvest. Currently average prices are 5 to 6 percent higher than the MSP and farmers are delaying picking / holding cotton in anticipation of further price increases.

Consumption

FAS Mumbai estimates 2018/19 consumption at 5.51 MMT, which is the same as the USDA official estimate. Cotton consumption continues to show strong growth from last year. According to the Textile Commissioner Office (TCO), the cotton consumption for August and September increased by 13 percent and 18 percent respectively as compared to last year. Mills continue to build on the growth in consumption from last season; however, the rising raw cotton prices and low yarn prices are reducing the price differential and squeezing the margins of the mills.

The new crop arrivals have commenced. Farm-gate prices have remained higher than the MSP since harvesting commenced, so the domestic purchases of raw cotton have remained limited. In November 2018, Indian ex-gin prices was on par with the Cotlook A Index prices, so mills may consider the option of buying foreign origin cotton.

Trade

FAS Mumbai estimates the 2018/19 exports at 936,000 MT, which is the same as the official USDA estimate. Exports in the first three months (August-October) of season 2018/19 have been twice as much as in the first three months of 2017/18, but as the Indian currency has strengthened by nearly four percent in November, shipments should to return to normalcy in the coming months.

Season 2018/19 exports in August and September from the United States to India include Pima and upland cotton at 9,036 MT. The share of Pima cotton exports is around 55 percent 4,980 MT, and the remaining 45 percent share is upland cotton. FAS Mumbai estimates the 2018/19 imports at 326,000 MT. Imports will remain stable as mills import for processing, and re-export to cover export commitments. The movement of the Indian currency will be a determining factor in the volume of imports in the latter half of the season.

Source: USDA Gain Report India, 12/2018

Excerpt from the Bremen Cotton Report No. 03/04 – January 24th, 2019.

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