Cotton output may fall to 5-year low

Whitefly attack damages crop in Punjab and Haryana; lack of rains threatens production in Gujarat and Maharashtra

India’s cotton output is likely to decline 12.4 per cent to hit the lowest in five years for the current crop year (October 2015–September 2016), due to crop damage in major producing states.

On Wednesday, the Cotton Advisory Board (CAB) under the Union ministry of textiles lowered the forecast it had made in February, saying the picture was now clearer. Output is now estimated at 33.8 million bales (a bale is 170 kg) for the current crop year, as against 38.6 mn bales the previous year (when drought had hit many states). The CAB had constituted three Sub-committees in its last meeting held in February last.

The Sub-committee on prices recommended the a format for compilation of prices and price reporting may be gradually shifted to metric system. For prices it recommended to refer to 29 mm length cotton indicating CAI’s spot prices, ICF prices, MCX Futures alongwith cotlook prices. The Sub-committee on best practices on cotton farming is working and is likely to submit the report in next CAB meeting.

Its February forecast was 35.2 mn bales. Due to the expectation of less output this year, there has been a rise in prices; the benchmark Shankar-6 variety has increased by 35 per cent in five months, to Rs 12,710 a quintal at present. This is the highest since October 2013. As a result, garments are likely to get costlier.

“The lower output was estimated because of whitefly attacks in Punjab, which affected the yield and thereby overall production,” said Kavita Gupta, textiles commissioner.

Punjab's output is estimated at 750,000 bales for 2015-16, from 1.3 mn the previous year. Neighbouring Haryana also reported big crop damage, with the estimate at 1.5 mn bales this year as against 2.3 mn last year. Output is also estimated to decline in Gujarat and Maharashtra (both hit by lack of rain), by 16 per cent and six per cent, respectively, to 9.4 mn bales and 7.5 mn bales.

“The rising price is set to make Indian apparel costlier, which would hit our competitiveness in the world market. The (recently announced) Rs 6,000-crore package approved by the ministry, offering incentives to producers, will be partly nullified,” said Rahul Mehta, president, Clothing Manufacturers Association of India, on the sidelines of the 63rd Garments Fair here on Wednesday.

The government has set a target of $50 billion of export for financial year 2016-17 (April 1-March 31), as against $38 bn in FY16.

ICRA Ratings says the spurt in domestic prices will adversely impact demand for yarn and profitability of spinning companies in the July-September quarter.

“The spurt is beyond (earlier) expectations, and points to a severe shortage in the domestic markets. Slower sowing and decline in sown area, apart from stocking by intermediaries, could have led to this sharp rise. However, the increase could also motivate farmers (to plant more in the next cycle),” said Anil Gupta, vice-president at ICRA.

A slow growth in domestic consumption and stagnation in exports are likely to adversely impact demand and export competitiveness of the Indian yarn.