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Cover Story | May 2017

Cotton Front Looks Up!

All pointers are pointing in the right direction for cotton, and the current cotton year is sure to bring more cheer to the cotton stakeholders in India, spells out an ITJ Exclusive Report.

After a year of whimpers and subdued whispers, it’s all smiles on the cotton front now!

All pointers are pointing in the right direction for cotton, and the current cotton year is sure to bring more cheer to the cotton stakeholders in India, spells out an ITJ Exclusive Report.

After a year of whimpers and subdued whispers, it’s all smiles on the cotton front now!Cotton, which has had a bad year in 2016, is facing better prospects in 2017. Firstly, though the prices which showed some unexpected spikes early in the current year, have started stabilising. Cotton statistics are turning optimistic. Producers and user industries are beaming!

Last year, the domestic production of cotton was hit severely in Punjab and Haryana due to whitefly attack and the pink bollworm attack in Gujarat. “We are estimating a bumper cotton crop this year because of a better monsoon and no pest attacks,” say cotton sources.

As per the International Cotton Advisory Committee (ICAC), India’s mill use of cotton also declined by three to 5.1 million tonne last year due to high domestic and international cotton prices. But now, despite a below normal monsoon forecast, 2017-18 is likely to turn out to be a better year for India’s cotton sector, and that the Indian textile industry’s cotton use is now projected to recover by 1 per cent to 5.2 million in 2017-18.

“The cotton situation is comfortable now. Prices, which were above the international prices, have come down now. The availability is adequate with about 34-odd million bales. We cannot have handle on the consumption. But with about 30 million bales of internal consumption from our stock and about 2.5 million bales of import, the condition is good for the cotton year,” said Nayan C Mirani of Khimji Visram & Sons, who is incidentally the President of Cotton Association of India (CAI).

Expressing his personal opinion, not as that of the official spokesman of CAI, Mirani told the Editor of ITJ: “Last cotton year pest fly affected the crop. Then the yield was not so good and monsoon too disappointed some cotton areas. Export was low last year, but this year, it is likely to be over 5.5 million bales. The cotton situation is stable. However, industry has to import cotton because there are two issues: One is quality issue and though we have good quality cotton available, people still need cotton from abroad for some production. The other is the price issue. For south-based mills, it is sometime cheaper to import than getting from far-flung areas in the country. It is mainly logistics.”

Mekala Mallappan Chockalingam, Director (Marketing) and Chairman and Managing Director (I/C), Cotton Corporation of India (CCI), said, “In terms of production, India is the highest cotton producer in the world, however, it lags behind in cotton productivity. At present, the average yield of cotton is about 550 kg/hectare, which is far below the world average of 750 kg/hectare and other cotton-producing countries like Australia (1,800 kg/hectare), China (1,600 kg/hectare) and Brazil (1,500 kg/hectare). The main productivity constraints in cotton cultivation are undependable monsoon, unsuitable soil, varietal multiplicity, use of non-certified seeds, improper spacing, inability to take-up timely sowing, non-adoption of recommended technologies especially in case of plant protection and fertilizer use, labour shortage, competition from other crops, endemic to pests, to name a few. India can also reach to the productivity level of other cotton-producing countries by concentrating on such technical aspects related with cotton sowing.”

He added, “During current cotton season 2016-17 (October-September), the acreage under cotton cultivation is expected to decrease by around 12 per cent to 105 lakh hectares as against 118.77 lakh hectares during previous year due to delayed rains, pest attacks viz whitefly in northern zone and pink boll worm in Gujarat region, switching over to other crops like guars, soybeans, pulses, groundnuts, etc. However, due to above normal rains and favourable agro-climatic conditions, yield was better in comparison to the previous year. The Cotton Advisory Board (CAB), in its meeting held on October 24, 2016, estimated that the cotton production may increase by 4 per cent to 351 lakh bales in comparison to 338 lakh bales of previous cotton season. Whereas total cotton consumption in the country is expected to increase to 313 lakh bales as against 312 lakh bales during previous year.”

“As consumption is increasing, India’s dependability on cotton export will reduce substantially. After including import and opening stock, the exportable surplus availability of cotton is getting concentrated, and it is expected that during cotton season 2016-17, cotton export may reduce to 50 to 55 lakh bales as against 69 lakh bales during 2015-16. As a result of demand and supply balance, domestic prices of cotton is ruling above MSP level and expected to remain stable throughout the year,” he added.

Speaking on the steps to improve the cotton productivity, MM Chockalingam added, “Productivity can be increased by motivating the farmers through awareness meetings and front line demonstrations for using good quality seeds, timely sowing, plant protection by using natural methods and adoption of modern/scientific farm practices like inter cropping, high-density planting system, etc. The Government of India is making all-out efforts for enhancement of yield in the country. Besides this, cotton research institutes are also making efforts by various R&D on pilot basis for increasing yield, improvement of quality, demonstration of best practices for reducing the contamination of cotton, developing new varieties of cotton, etc. In this endeavour, the plan of revival of Technology Mission on Cotton (TMC)- Phase-II is underway wherein Mini Mission-I and II is targeted looking to the present requirement of high yielding good quality of cotton and face upliftment of Indian cotton at global level by adapting global best practices and development of desi cotton along with new multi gene GM cotton.”

Let’s take Punjab alone: Last year, cotton cultivation was in only 2.56 hectares, the lowest ever, but now is expected to be 50 per cent higher than this area. The yield was 197 kg per hectare, but now has already gone up to over 750 kg. Last year’s paddy-and-pulses loving farmers are flirting with cotton now.

However, despite delayed harvesting previously and a below normal monsoon forecast this year, the Indian textile industry’s cotton use is now projected to recover by 1 per cent to 5.2 million in 2017-18. In addition, cotton imports from key markets like China and Vietnam are also set to grow by 4-6 per cent, thereby increasing India’s position in domestic and global cotton market. Speaking on the impact of GST on cotton industry, Amit Gugnani, who is Senior Vice President, Fashion – Textile & Apparel, Technopak, said “The implementation of GST is expected to provide a unified tax structure to cotton with MMF especially polyester. With the final GST rates yet to be announced, even the lowest rate of 8 per cent will affect cotton value chain adversely as it currently attracts zero excise duty. The industry is hopeful though, that the cotton will continue to attract a zero taxation.”

States International Cotton Advisory Committee: “India’s production is projected to grow by two per cent to 5.9 million tonne while production in China could reach 4.8 million tonne in 2017-18 as area expands by three per cent to 3 million hectares after five seasons of contraction. After declining by three per cent to 5.1 million tonne in 2016-17 due to high domestic and international cotton prices, India’s mill use is projected to recover by one per cent to 5.2 million tonne in 2017-18. India’s exports are projected to decline by 23 per cent to 9,60,000 tonne in 2016-17, partially due to the delay in harvesting earlier this season.”

The Cotton Association of India (CAI) has maintained its estimate for production of cotton in the country in 2016-17 for October to September at 34.1 million bales where one bale is 170 kg, as it had projected in January. In 2016-17, farmers continue to realise better price for their produce since the cotton prices have remained firm.

According to a commodity research organisation, “the cotton prices are expected to stabilise in coming months due to sufficient availability of cotton in the domestic market. Moreover, CCI has also been purchasing cotton at commercial rates during the current season and might have procured more than 1,00,000 bales bales which will be available for the textile mills later in the season. Cotton prices for rest of the season will be driven by the export demand from the country which is expected to be good due to China demand.” Exports of cotton in India decreased to a record low of $969.61 million in 2016 from $3231.57 million in 2015. Exports of cotton in India averaged $3,995.18 million from 1996 until 2016, reaching an all time high of $9,926.42 million in 2013, according to the CCI’s statistics.

The total area under cultivation has fallen to 8.61 million hectare in 2016-17 from 10.68 million hectares in 2015-16. India’s cotton production is expected to increase by 3.8 per cent in 2016-17 from a year ago period due to a sharp growth in yield in the aftermath of a favorable monsoon. The Cotton Advisory Board (CAB) estimates that the domestic cotton production could reach 35.1 million bales of 170 kg each for the cotton year 2016-17.

The cotton board has estimated a 17.47 per cent growth in yield to 568.29 kg per hectare in 2016-17 from 483.79 kg per hectare in 2015-16. The average yield in Punjab is likely to rise to 597.66 kg per hectare in 2016-17 from 376.11 kg per hectare in 2015-16.

India-Ratings (Ind-Ra) Ind-Ra expects acreage to increase 10-15 per cent to near 120 million hectares in FY18, leading to increased production. The expectation is in view of recent high domestic cotton prices and high remuneration compared with other competing crops in marketing year (MY October-September) 2016-17. The expected increase in acreage in MY17-18 will assist in maintaining stable prices in 2HFY18, considering positive-to-stable sentiments among market participants about the quantum of global cotton trade. Ind-Ra projects a domestic stock-to-use ratio of nearly 13 per cent for MY17-18 (MY16-17: 15.3 per cent, MY15-16: 13.8 per cent).

According to CCI, India would witness better cotton crops in MY16-17 October-September, with domestic production standing at 35.1 million bales (MY15-16 October-September: 33.8 million bales), primarily driven by favourable monsoons and high-yielding bacillus thuringiensis cotton (about 90 per cent of the total cotton cultivated area). However, the production level estimate is the lowest recorded over MY11-12-MY16-17, except MY15-16. The estimated increase in production in MY16-17 will not cover the steep decline in production in MY15-16. Hence, despite recovery, production will fall short of consumption for the second consecutive year in FY18, and, hence, the decline in elevated stock levels of MY14-15 will continue.

Ind-Ra expects cotton consumption in India to increase about 5 per cent yoy in FY18, driven by strong mill consumption due to rising per capita income, increased focus on textiles by the government and subsequent expected increase in installed capacity. Furthermore, CCI’s recent policy to buy and sell raw cotton to ensure stable prices will limit artificial shortage and enable stable domestic demand and supply.

The domestic cotton price trend tends to mimic the global cotton price trend. In the absence of any exogenous shock, along with stable demand, Ind-Ra expects domestic cotton prices to remain stable in FY18. Domestic cotton prices remained firm despite a decline in exports to less than 10 per cent of domestically available cotton in MY16-17 (20-30 per cent over MY09-10 to MY13-14). This was due to lower-than-expected global production and increased domestic consumption. Cotton prices are likely to soften in 1QFY18 due to higher production estimates for the cotton season 2016-2017.

“CICR has been working over the past few years on several concepts related to the best practices that can lead towards sustainable cotton production systems. Over the past 10 years, CICR coordinated a project under the Technology Mission on cotton to develop 21 short-duration compact Bt varieties with high harvest index.

A new Bt variety of 120 days duration is in the final stage of testing and hold tremendous promise for its breakthrough potential. The new culture ‘CICR-Ugank-Bt’ is a compact Bt variety of 120 days duration. It is highly tolerant to sap-sucking pests, short statured at 65-70 cm height with high harvest index and very good fibre quality. Its performance in field trials at CICR farm was excellent. High-density planting systems were experimented under Indian conditions. Plastic mulching, conservation tillage, canopy management and precision input management were successfully tested at different centres,” concluded Chockalingam.

World cotton scenario

Pakistan is one of the major importers of Indian cotton. Last year, it bought almost 40 per cent of India’s cotton due to a crop failure in its domestic market last year. This year Pakistan’s requirement is expected to be less.

The Chinese government, which has already started sales from its cotton reserves plans to continue offering around 30,000 tonne a day until the end of August 2017. More cotton may be put up for auction if sales are strong and market prices rise. Last year, around 2.6 million tonne were sold through the end of September 2016. Assuming a similar volume is sold this year, the total volume held by the Chinese government will reach 6 million tonne by the end of 2016-17. China’s total stocks, including those in the private sector, are forecast to reach 9.3 million tonne at the end of 2016-17, accounting for 53 per cent of world stocks.

Cotton production in China has been declining since FY15, due to the reduced competitiveness of the crop after a change in the Government’s cotton policy. The USDA expects cotton production in China to decline for the fourth consecutive year and to a 16-year low in CY17. The Chinese government is gradually liquidating reserve cotton stock (accumulated during 2010-15) in view of a widening gap between annual cotton supply and consumption in the country. Thus, the correction in Chinese stock levels will continue. China’s cotton reserve sales to domestic mills, received a healthy response over May-September 2016.

USDA estimates mill consumption of cotton in China for MY16-17 at 36.3 million bales, the highest in the last five years. The estimate is based on adequate availability of cotton at relatively lower prices. Ind-Ra expects continued lower imports by China in FY18, given continued release of domestic cotton stock.

World ending stocks are expected to decline by 7 per cent to 17.9 million tonne in 2016-17. In 2017-18, world cotton consumption is projected to exceed production by 1.2 million tonne and stocks are expected to decline for the third consecutive season to 16.7 million tonne. China’s ending stocks could fall by 19 per cent to 7.5 million tonne, accounting for 45 per cent of world stocks at the end of 2017-18. This would mark the first season since 2011-12 that China’s stocks account for less than half of world inventories. World ending stocks outside of China are forecast to grow by 7 per cent to 8 million tonne, which could place downward pressure on prices later this season.

Global cotton production is forecast to grow by 23.1 million tonne on a planted area of 30.4 million hectares in 2017-18. India’s cotton production is projected to rise by 2 per cent to 5.9 million tonne, as area expands by 7 per cent to 11.2 million hectares. China’s cotton production may increase by 2 per cent to 4.8 million tonne, but will greatly depend on whether a subsidy is provided this year. While high cotton prices relative to competing crops is likely to lead to a large increase in planted area expected in the US in 2017-18, production is forecast to rise by just 1 per cent to 3.7 million tonne. Assuming normal weather patterns, the harvested area is projected to expand by 3 per cent to just under 4 million hectares. Pakistan’s cotton production is forecast to grow by 11 per cent to 1.9 million tonne. Its cotton area is projected to expand by 3 per cent to 2.5 million hectares as high prices this season encourage farmers to plant, and the average yield may grow by 8 per cent to 736 kg/hectare as the crop recovers from pest pressure.

After declining by 1 per cent to 24 million tonne in in 2015-16, world cotton consumption is expected to remain stable in 2016-17. Given the strong demand this season and anticipated world economic growth in 2017 and 2018, world mill use is forecast to increase by 1 per cent to 24.3 million tonne. China’s consumption and share in the world total declined continuously from 2010-11 to 2015-16, when it reached 7.4 million tonne. While its mill use is forecast to grow by 2 per cent to 7.6 million tonne in 2016-17 and by 1 per cent to 7.7 million tonne in 2017-18, its world share of cotton consumption is likely to remain at 30 per cent. Mill use in India is projected to decline by 3 per cent to 5.1 million tonne in 2016-17, but is forecast to recover by 1 per cent to 5.2 million tonne in 2017-18. Consumption in Bangladesh continues to grow due to strong textile exports, with its mill use likely to rise by 5 per cent to 1.5 million tonne in 2017-18. Mill use in Vietnam has more than doubled in the last five years from around 5,00,000 tonne in 2012-13 to an expected 1.2 million tonne in 2017-18.

World trade is expected to expand by 3 per cent to 8 million tonne in 2017-18. China’s import volume is expected to rise by 11 per cent to 1.1 million tonne in 2017-18 as its mill use continues to outpace its production. Bangladesh’s imports are projected to rise by 3 per cent to 1.5 million tonne in 2017-18, while Vietnam’s imports are forecast to increase by by 7 per cent to 1.24 million tonne. The US is expected to remain the world’s largest exporter and its volume is forecast to rise by 5 per cent to 2.9 million tonne in 2017-18. Exports from India, the world’s second largest exporter, are projected to grow by 3 per cent to 9,90,000 tonne.

According to Dr Seshadri Ramkumar from Texas Tech University, USA, the demand for cotton is strong, which will be reflected in increased plantings. High level of optimism was evident in Lubbock at the Plains Cotton Growers’ (PCG) meeting recently. “At least, 15 per cent increase in acreage is expected against last year, this planting season in Texas. High Plains of Texas with 41 cotton-growing counties will see 15 to 20 per cent increase in cotton planting this spring compared to last year. Given the yield, quality of the crop and the price levels, cotton is the best crop in High Plains against food grains. High Plains has seen enhancement of quality in the recent crops with low bark, improvement in micronaire, which drive up cotton production, as there is demand for quality cotton world over. The importance of quality cotton with less contamination is a need felt by Indian cotton spinners. This may the reason; exporters like Australia are taking a serious look at Indian market, which itself is a leading producer of cotton,” says Dr Ramkumar.

Last year, High Plains of cotton planted 3.68 million acres of upland cotton, which is expected to go up this year. Steve Verett, Executive VP of PCG stated, growers are indicating an increase of cotton plantings for 2017, especially in the northern high plains region. Many of PCG’s members plant a various mixture of crops and we support their seeking the mix that is most efficient and profitable for their individual operation, added Verett.

Says Ramkumar: “The main reason for increased interest in cotton is the growing demand for cotton. Price fluctuations with synthetics and increase in general demand for cotton are major drivers. This season’s (October 2016–September 2017) India’s crop is not what it was expected earlier, which also has aided more interest in cotton in the High Plains of Texas and elsewhere.” Of course, weather will be a major driver on what the yields will be for the 2017 crop in Texas, the leading cotton producing state in the United States. Large range modeling hits that good weather patterns in May to June period, that may be beneficial to cotton said, Matt Ernst, Fox34 chief meteorologist in Lubbock.

Dr Ramkumar concludes: “All pointers are pointing in the right direction for cotton and surely, demand is leading the charge for more cotton.”

Cotton, which has had a bad year in 2016, is facing better prospects in 2017. Firstly, though the prices which showed some unexpected spikes early in the current year, have started stabilising. Cotton statistics are turning optimistic. Producers and user industries are beaming!

Last year, the domestic production of cotton was hit severely in Punjab and Haryana due to whitefly attack and the pink bollworm attack in Gujarat. “We are estimating a bumper cotton crop this year because of a better monsoon and no pest attacks,” say cotton sources.

As per the International Cotton Advisory Committee (ICAC), India’s mill use of cotton also declined by three to 5.1 million tonne last year due to high domestic and international cotton prices. But now, despite a below normal monsoon forecast, 2017-18 is likely to turn out to be a better year for India’s cotton sector, and that the Indian textile industry’s cotton use is now projected to recover by 1 per cent to 5.2 million in 2017-18.

“The cotton situation is comfortable now. Prices, which were above the international prices, have come down now. The availability is adequate with about 34-odd million bales. We cannot have handle on the consumption. But with about 30 million bales of internal consumption from our stock and about 2.5 million bales of import, the condition is good for the cotton year,” said Nayan C Mirani of Khimji Visram & Sons, who is incidentally the President of Cotton Association of India (CAI).

Expressing his personal opinion, not as that of the official spokesman of CAI, Mirani told the Editor of ITJ: “Last cotton year pest fly affected the crop. Then the yield was not so good and monsoon too disappointed some cotton areas. Export was low last year, but this year, it is likely to be over 5.5 million bales. The cotton situation is stable. However, industry has to import cotton because there are two issues: One is quality issue and though we have good quality cotton available, people still need cotton from abroad for some production. The other is the price issue. For south-based mills, it is sometime cheaper to import than getting from far-flung areas in the country. It is mainly logistics.”

Mekala Mallappan Chockalingam, Director (Marketing) and Chairman and Managing Director (I/C), Cotton Corporation of India (CCI), said, “In terms of production, India is the highest cotton producer in the world, however, it lags behind in cotton productivity. At present, the average yield of cotton is about 550 kg/hectare, which is far below the world average of 750 kg/hectare and other cotton-producing countries like Australia (1,800 kg/hectare), China (1,600 kg/hectare) and Brazil (1,500 kg/hectare). The main productivity constraints in cotton cultivation are undependable monsoon, unsuitable soil, varietal multiplicity, use of non-certified seeds, improper spacing, inability to take-up timely sowing, non-adoption of recommended technologies especially in case of plant protection and fertilizer use, labour shortage, competition from other crops, endemic to pests, to name a few. India can also reach to the productivity level of other cotton-producing countries by concentrating on such technical aspects related with cotton sowing.”

He added, “During current cotton season 2016-17 (October-September), the acreage under cotton cultivation is expected to decrease by around 12 per cent to 105 lakh hectares as against 118.77 lakh hectares during previous year due to delayed rains, pest attacks viz whitefly in northern zone and pink boll worm in Gujarat region, switching over to other crops like guars, soybeans, pulses, groundnuts, etc. However, due to above normal rains and favourable agro-climatic conditions, yield was better in comparison to the previous year. The Cotton Advisory Board (CAB), in its meeting held on October 24, 2016, estimated that the cotton production may increase by 4 per cent to 351 lakh bales in comparison to 338 lakh bales of previous cotton season. Whereas total cotton consumption in the country is expected to increase to 313 lakh bales as against 312 lakh bales during previous year.”

“As consumption is increasing, India’s dependability on cotton export will reduce substantially. After including import and opening stock, the exportable surplus availability of cotton is getting concentrated, and it is expected that during cotton season 2016-17, cotton export may reduce to 50 to 55 lakh bales as against 69 lakh bales during 2015-16. As a result of demand and supply balance, domestic prices of cotton is ruling above MSP level and expected to remain stable throughout the year,” he added.

Speaking on the steps to improve the cotton productivity, MM Chockalingam added, “Productivity can be increased by motivating the farmers through awareness meetings and front line demonstrations for using good quality seeds, timely sowing, plant protection by using natural methods and adoption of modern/scientific farm practices like inter cropping, high-density planting system, etc. The Government of India is making all-out efforts for enhancement of yield in the country. Besides this, cotton research institutes are also making efforts by various R&D on pilot basis for increasing yield, improvement of quality, demonstration of best practices for reducing the contamination of cotton, developing new varieties of cotton, etc. In this endeavour, the plan of revival of Technology Mission on Cotton (TMC)- Phase-II is underway wherein Mini Mission-I and II is targeted looking to the present requirement of high yielding good quality of cotton and face upliftment of Indian cotton at global level by adapting global best practices and development of desi cotton along with new multi gene GM cotton.”

Let’s take Punjab alone: Last year, cotton cultivation was in only 2.56 hectares, the lowest ever, but now is expected to be 50 per cent higher than this area. The yield was 197 kg per hectare, but now has already gone up to over 750 kg. Last year’s paddy-and-pulses loving farmers are flirting with cotton now.

However, despite delayed harvesting previously and a below normal monsoon forecast this year, the Indian textile industry’s cotton use is now projected to recover by 1 per cent to 5.2 million in 2017-18. In addition, cotton imports from key markets like China and Vietnam are also set to grow by 4-6 per cent, thereby increasing India’s position in domestic and global cotton market. Speaking on the impact of GST on cotton industry, Amit Gugnani, who is Senior Vice President, Fashion – Textile & Apparel, Technopak, said “The implementation of GST is expected to provide a unified tax structure to cotton with MMF especially polyester. With the final GST rates yet to be announced, even the lowest rate of 8 per cent will affect cotton value chain adversely as it currently attracts zero excise duty. The industry is hopeful though, that the cotton will continue to attract a zero taxation.”

States International Cotton Advisory Committee: “India’s production is projected to grow by two per cent to 5.9 million tonne while production in China could reach 4.8 million tonne in 2017-18 as area expands by three per cent to 3 million hectares after five seasons of contraction. After declining by three per cent to 5.1 million tonne in 2016-17 due to high domestic and international cotton prices, India’s mill use is projected to recover by one per cent to 5.2 million tonne in 2017-18. India’s exports are projected to decline by 23 per cent to 9,60,000 tonne in 2016-17, partially due to the delay in harvesting earlier this season.”

The Cotton Association of India (CAI) has maintained its estimate for production of cotton in the country in 2016-17 for October to September at 34.1 million bales where one bale is 170 kg, as it had projected in January. In 2016-17, farmers continue to realise better price for their produce since the cotton prices have remained firm.

According to a commodity research organisation, “the cotton prices are expected to stabilise in coming months due to sufficient availability of cotton in the domestic market. Moreover, CCI has also been purchasing cotton at commercial rates during the current season and might have procured more than 1,00,000 bales bales which will be available for the textile mills later in the season. Cotton prices for rest of the season will be driven by the export demand from the country which is expected to be good due to China demand.” Exports of cotton in India decreased to a record low of $969.61 million in 2016 from $3231.57 million in 2015. Exports of cotton in India averaged $3,995.18 million from 1996 until 2016, reaching an all time high of $9,926.42 million in 2013, according to the CCI’s statistics.

The total area under cultivation has fallen to 8.61 million hectare in 2016-17 from 10.68 million hectares in 2015-16. India’s cotton production is expected to increase by 3.8 per cent in 2016-17 from a year ago period due to a sharp growth in yield in the aftermath of a favorable monsoon. The Cotton Advisory Board (CAB) estimates that the domestic cotton production could reach 35.1 million bales of 170 kg each for the cotton year 2016-17.

The cotton board has estimated a 17.47 per cent growth in yield to 568.29 kg per hectare in 2016-17 from 483.79 kg per hectare in 2015-16. The average yield in Punjab is likely to rise to 597.66 kg per hectare in 2016-17 from 376.11 kg per hectare in 2015-16.

India-Ratings (Ind-Ra) Ind-Ra expects acreage to increase 10-15 per cent to near 120 million hectares in FY18, leading to increased production. The expectation is in view of recent high domestic cotton prices and high remuneration compared with other competing crops in marketing year (MY October-September) 2016-17. The expected increase in acreage in MY17-18 will assist in maintaining stable prices in 2HFY18, considering positive-to-stable sentiments among market participants about the quantum of global cotton trade. Ind-Ra projects a domestic stock-to-use ratio of nearly 13 per cent for MY17-18 (MY16-17: 15.3 per cent, MY15-16: 13.8 per cent).

According to CCI, India would witness better cotton crops in MY16-17 October-September, with domestic production standing at 35.1 million bales (MY15-16 October-September: 33.8 million bales), primarily driven by favourable monsoons and high-yielding bacillus thuringiensis cotton (about 90 per cent of the total cotton cultivated area). However, the production level estimate is the lowest recorded over MY11-12-MY16-17, except MY15-16. The estimated increase in production in MY16-17 will not cover the steep decline in production in MY15-16. Hence, despite recovery, production will fall short of consumption for the second consecutive year in FY18, and, hence, the decline in elevated stock levels of MY14-15 will continue.

Ind-Ra expects cotton consumption in India to increase about 5 per cent yoy in FY18, driven by strong mill consumption due to rising per capita income, increased focus on textiles by the government and subsequent expected increase in installed capacity. Furthermore, CCI’s recent policy to buy and sell raw cotton to ensure stable prices will limit artificial shortage and enable stable domestic demand and supply.

The domestic cotton price trend tends to mimic the global cotton price trend. In the absence of any exogenous shock, along with stable demand, Ind-Ra expects domestic cotton prices to remain stable in FY18. Domestic cotton prices remained firm despite a decline in exports to less than 10 per cent of domestically available cotton in MY16-17 (20-30 per cent over MY09-10 to MY13-14). This was due to lower-than-expected global production and increased domestic consumption. Cotton prices are likely to soften in 1QFY18 due to higher production estimates for the cotton season 2016-2017.

“CICR has been working over the past few years on several concepts related to the best practices that can lead towards sustainable cotton production systems. Over the past 10 years, CICR coordinated a project under the Technology Mission on cotton to develop 21 short-duration compact Bt varieties with high harvest index.

A new Bt variety of 120 days duration is in the final stage of testing and hold tremendous promise for its breakthrough potential. The new culture ‘CICR-Ugank-Bt’ is a compact Bt variety of 120 days duration. It is highly tolerant to sap-sucking pests, short statured at 65-70 cm height with high harvest index and very good fibre quality. Its performance in field trials at CICR farm was excellent. High-density planting systems were experimented under Indian conditions. Plastic mulching, conservation tillage, canopy management and precision input management were successfully tested at different centres,” concluded Chockalingam.

World cotton scenario

Pakistan is one of the major importers of Indian cotton. Last year, it bought almost 40 per cent of India’s cotton due to a crop failure in its domestic market last year. This year Pakistan’s requirement is expected to be less.

The Chinese government, which has already started sales from its cotton reserves plans to continue offering around 30,000 tonne a day until the end of August 2017. More cotton may be put up for auction if sales are strong and market prices rise. Last year, around 2.6 million tonne were sold through the end of September 2016. Assuming a similar volume is sold this year, the total volume held by the Chinese government will reach 6 million tonne by the end of 2016-17. China’s total stocks, including those in the private sector, are forecast to reach 9.3 million tonne at the end of 2016-17, accounting for 53 per cent of world stocks.

Cotton production in China has been declining since FY15, due to the reduced competitiveness of the crop after a change in the Government’s cotton policy. The USDA expects cotton production in China to decline for the fourth consecutive year and to a 16-year low in CY17. The Chinese government is gradually liquidating reserve cotton stock (accumulated during 2010-15) in view of a widening gap between annual cotton supply and consumption in the country. Thus, the correction in Chinese stock levels will continue. China’s cotton reserve sales to domestic mills, received a healthy response over May-September 2016.

USDA estimates mill consumption of cotton in China for MY16-17 at 36.3 million bales, the highest in the last five years. The estimate is based on adequate availability of cotton at relatively lower prices. Ind-Ra expects continued lower imports by China in FY18, given continued release of domestic cotton stock.

World ending stocks are expected to decline by 7 per cent to 17.9 million tonne in 2016-17. In 2017-18, world cotton consumption is projected to exceed production by 1.2 million tonne and stocks are expected to decline for the third consecutive season to 16.7 million tonne. China’s ending stocks could fall by 19 per cent to 7.5 million tonne, accounting for 45 per cent of world stocks at the end of 2017-18. This would mark the first season since 2011-12 that China’s stocks account for less than half of world inventories. World ending stocks outside of China are forecast to grow by 7 per cent to 8 million tonne, which could place downward pressure on prices later this season.

Global cotton production is forecast to grow by 23.1 million tonne on a planted area of 30.4 million hectares in 2017-18. India’s cotton production is projected to rise by 2 per cent to 5.9 million tonne, as area expands by 7 per cent to 11.2 million hectares. China’s cotton production may increase by 2 per cent to 4.8 million tonne, but will greatly depend on whether a subsidy is provided this year. While high cotton prices relative to competing crops is likely to lead to a large increase in planted area expected in the US in 2017-18, production is forecast to rise by just 1 per cent to 3.7 million tonne. Assuming normal weather patterns, the harvested area is projected to expand by 3 per cent to just under 4 million hectares. Pakistan’s cotton production is forecast to grow by 11 per cent to 1.9 million tonne. Its cotton area is projected to expand by 3 per cent to 2.5 million hectares as high prices this season encourage farmers to plant, and the average yield may grow by 8 per cent to 736 kg/hectare as the crop recovers from pest pressure.

After declining by 1 per cent to 24 million tonne in in 2015-16, world cotton consumption is expected to remain stable in 2016-17. Given the strong demand this season and anticipated world economic growth in 2017 and 2018, world mill use is forecast to increase by 1 per cent to 24.3 million tonne. China’s consumption and share in the world total declined continuously from 2010-11 to 2015-16, when it reached 7.4 million tonne. While its mill use is forecast to grow by 2 per cent to 7.6 million tonne in 2016-17 and by 1 per cent to 7.7 million tonne in 2017-18, its world share of cotton consumption is likely to remain at 30 per cent. Mill use in India is projected to decline by 3 per cent to 5.1 million tonne in 2016-17, but is forecast to recover by 1 per cent to 5.2 million tonne in 2017-18. Consumption in Bangladesh continues to grow due to strong textile exports, with its mill use likely to rise by 5 per cent to 1.5 million tonne in 2017-18. Mill use in Vietnam has more than doubled in the last five years from around 5,00,000 tonne in 2012-13 to an expected 1.2 million tonne in 2017-18.

World trade is expected to expand by 3 per cent to 8 million tonne in 2017-18. China’s import volume is expected to rise by 11 per cent to 1.1 million tonne in 2017-18 as its mill use continues to outpace its production. Bangladesh’s imports are projected to rise by 3 per cent to 1.5 million tonne in 2017-18, while Vietnam’s imports are forecast to increase by by 7 per cent to 1.24 million tonne. The US is expected to remain the world’s largest exporter and its volume is forecast to rise by 5 per cent to 2.9 million tonne in 2017-18. Exports from India, the world’s second largest exporter, are projected to grow by 3 per cent to 9,90,000 tonne.

According to Dr Seshadri Ramkumar from Texas Tech University, USA, the demand for cotton is strong, which will be reflected in increased plantings. High level of optimism was evident in Lubbock at the Plains Cotton Growers’ (PCG) meeting recently. “At least, 15 per cent increase in acreage is expected against last year, this planting season in Texas. High Plains of Texas with 41 cotton-growing counties will see 15 to 20 per cent increase in cotton planting this spring compared to last year. Given the yield, quality of the crop and the price levels, cotton is the best crop in High Plains against food grains. High Plains has seen enhancement of quality in the recent crops with low bark, improvement in micronaire, which drive up cotton production, as there is demand for quality cotton world over. The importance of quality cotton with less contamination is a need felt by Indian cotton spinners. This may the reason; exporters like Australia are taking a serious look at Indian market, which itself is a leading producer of cotton,” says Dr Ramkumar.

Last year, High Plains of cotton planted 3.68 million acres of upland cotton, which is expected to go up this year. Steve Verett, Executive VP of PCG stated, growers are indicating an increase of cotton plantings for 2017, especially in the northern high plains region. Many of PCG’s members plant a various mixture of crops and we support their seeking the mix that is most efficient and profitable for their individual operation, added Verett.

Says Ramkumar: “The main reason for increased interest in cotton is the growing demand for cotton. Price fluctuations with synthetics and increase in general demand for cotton are major drivers. This season’s (October 2016–September 2017) India’s crop is not what it was expected earlier, which also has aided more interest in cotton in the High Plains of Texas and elsewhere.” Of course, weather will be a major driver on what the yields will be for the 2017 crop in Texas, the leading cotton producing state in the United States. Large range modeling hits that good weather patterns in May to June period, that may be beneficial to cotton said, Matt Ernst, Fox34 chief meteorologist in Lubbock.

Dr Ramkumar concludes: “All pointers are pointing in the right direction for cotton and surely, demand is leading the charge for more cotton.”

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