Following low arrivals, with falling yield due to pest attack, the cotton crop is set to fall significantly, say observers.
Clarity is expected in a few weeks on the extent of damage the pink bollworm has done to the standing crop, especially in Maharashtra and Telangana. This had also happened last year in Gujarat and three years earlier in Haryana. Its gravity is higher this year; in disease-prone districts, farmers are selling damaged crop at 10-15% less.
Cotton Association of India (CAI) has projected the 2017-18 crop at 37.5 million bales (170 kg each). Atul Ganatra, president of CAI, said, "Based on reports from mandis (wholesale markets), we feel the yield will be lower by 10% and, looking at lower arrivals at the beginning of the season, we will have to revise the crop estimate lower." Usually, from November onward, daily arrival historically averaged 200,000 bales a day; this time, they are 30% lower. Lower yield, crop damage and farmers being tempted to hold their crop to sell later at higher prices, where crop and quality are better, are considered the reasons. This year, several districts in Maharashtra, Telangana and in Tamil Nadu and Karnataka have been hit. Gujarat had already declared a bonus of Rs 500 a quintal above the Minimum Support Price (MSP) for cotton farmers. "We are ready for procurement (at the MSP)," said P Alli Rani, chairman of the government-run Cotton Corporation of India. The market estimates the season's procurement will be two to three million bales.
However, CCI would not be able to procure cotton with moisture content and quality below the prescribed norm. Hence, in Maharashtra, representations have been made to the state government, which is considering how to help affected growers. The state government might ask its Agriculture Marketing Federation to be aggressive in supporting farmers, said sources.
Maharashtra and Andhra together produce 40% of the total crop. With lower arrival and possibility of downward revision of crop estimates, the market is turning bullish on prices. Anuj Gupta at Angel Broking said, "We are expecting the price to go up in the near term to Rs 19,500 to Rs 20,000 (a bale). Currently, prices in MCX futures are Rs 18,550. The total crop size is high but the yield is poor."