Farmers stay away from cotton, prefer other crops due to better incentives

Lower cotton acreage and lower availability at a time when crude oil prices are falling is likely to raise India's consumption of manmade fibre and synthetic yarn

Farmers have reduced area under cotton sowing this season in favour of some oilseeds in which they foresee better earnings. Cotton prices, despite a much lower crop as estimated by trade and industry, have not given them much returns in the last season. Lower cotton acreage and lower availability at a time when crude oil prices are falling is likely to raise India’s consumption of manmade fibre (MMF) and synthetic yarn in the years ahead, which are produced from derivatives of crude oil.

The two-week delay in the monsoon rainfalls has resulted in a swift diversion of kharif farming from cotton to soybean, which had a better price realization and higher minimum support price (MSP) this season.

While sowing area under cotton has declined by 8 per cent so far this season (July 5), that of groundnut rose by 7 per cent. Experts believe that 32 per cent fall in sowing area till now this year is set to recover with the increase in the intensity of rainfalls.

“Cotton output in India was impacted last year due to drought in many cotton growing states including Maharashtra, Telangana and Andhra Pradesh. This year also, the seasonal rainfalls were delayed by two weeks which prompted farmers to sow better remunerative crop like soybean which will reflect in forthcoming data release,” said Ajay Kedia, Managing Director, Kedia Commodity, a city based commodity broking and advisory firm.

Meanwhile, the Cotton Advisory Board (CAB) under the Ministry of Textiles has forecast India’s cotton output at 36.10 million bales (1 bale=170 kg) for 2019-20 compared to 37 million bales estimated for the previous year. Trade forecast was much lower though. Agmarknet data show that farmers’ realization shot up by a staggering 56 per cent from groundnut for the between October 2019 and early-July 2019. Compared to that, however, farmers’ realization jumped by 17 per cent from soybean and a mere 5 per cent from cotton.

“With the government increased a mere 2 per cent in cotton minimum support price (MSP) for 2019-20 compared to 5 per cent and 9 per cent in groundnut and soybean respectively, it makes sense to sow more remunerative crops like oilseeds than sticking to the one crop like cotton,” said Arun Sakseria, a leading cotton trader here.

While cotton production in India depends largely on the distribution of the monsoon rainfalls, their uneven distribution impacts India’s cotton output immensely. Declining cotton crop has created room to increase manmade fibre consumption across textile sector.

“We anticipate manmade fibre and fabric demand to increase with the sharp rebound in textile demand from both domestic and international markets,” said Madhu Sudhan Bhageria, Chairman, Filatex India.