Despite higher output, prices to stay firm

Rising export demand has been a major factor keeping cotton prices high.

The country’s cotton output this year is expected to be 32.5 million bales (170 kg to a bale), a tenth more than last year, despite yields being affected in the north.

Prices are already higher than last year, despite the government’s efforts to restrict exports. With higher demand at home and abroad, they’re expected to rise further.

The yield is expected to be lower in Punjab, Haryana and Rajasthan. The yield in the Bathinda belt is about 20 quintals per hectare, as compared to 25-30 quintals per hectare last year. The fall of about 25 per cent is reflecting in mandi arrivals.

The yield has been effected due to the leaf curl virus that stunts growth of the cotton flower, explains Jagtar Singh Mehma, a farmer from Bathinda.

The loss can be covered by the better yield expected in Andhra Pradesh and Maharashtra. The southern states are likely to record an average yield of 20 qtls per hectare, which is good considering water availability in the region. The average yield is higher in the north due to the network of canals there.

Area
The area under cotton this rabi season is projected at 10.8 million hectares (m ha) to 11 m ha, as compared to 10.3 m ha last year. It fell in Haryana and Rajasthan and was stagnant in Punjab.

A fall of about 12 per cent is projected in Rajasthan and Haryana (this is percentage of the total area under cotton in the specified state), say scientists at the Haryana Agricultural University, Hisar.

However, the area has risen in Andhra by 12 per cent, Maharashtra by 11 per cent and in Gujarat by five to six per cent.

Around 90 per cent of the crop sown in the past two years has been genetically modified cotton. The output this year, state-wise, is expected to be (in million bales), Punjab 1.65, Haryana 1.4, Andhra 6.5, Maharashtra 7.7, Gujarat 10.7.
 

BOOM TIME
	Trend	2009-10	2010-11	Expectation
Cotton yield	Crop effected by leaf curl virus in north, good crop in other parts	25-30 qtl/hectare in north 18-20 qtl/hectare in south	20-22 qtl/hectare in north Over 20 qtl/hectare in south	Loss in northern states likely to be covered by gain in southern states
Area under cotton	Increase in net sown area	10.3 million hectares	10.8-11 million hectares	Rise in acreage to give better crop
Outlook for total output	Target likely to be achieved	29.5 million bales	32.5 million bales	Better volume than last year
Price	Consistent price revision	Rs 28,000 per candy	Rs 40,000 per candy	Likely to touch Rs 43,000 per candy
Exports		8.5 million bales	5.5 million bales	Target expected to be revised if production crosses 32.5 million bales

Prices
The exceptionally high demand in the international market and consistent demand at home have meant rising prices. In the past five weeks, prices have risen 25-30 per cent.

Cotton’s market price is Rs 41,000 per candy (356 kg), likely to rise further. The unprecedented rise in the price has diminished the role of Cotton Corporation of India (CCI), which had a target of buying a tenth of the arrivals. A CCI official said the corporation had been doing only token buying.

Rising export demand has been a major factor keeping prices high, despite the higher crop. The government had opened registration for up to 5.5 million bales for exports. Permission for four million has been issued till date.