The two states contribute nearly half of the cotton output in India.
Analysts estimate total cotton output at 32.5-33 million bales (of 170 kgs each) for the crop year October 2018-September 2019, down from 36.5 million bales reported in the previous year. The premier industry body, the Cotton Association of India (CAI), in its October estimates, forecast cotton output at 34.3 million bales for the season 2018-19.
The November rainfall, known as northeast rainfall season in trade parlance, however, is still awaited. This keeps the hopes of cotton consumers alive.
Deficient and erratic southwest monsoon followed by a long dry spell this winter season has impacted the standing crop. While the first cycle of cotton picking is over, the second and third cycles are likely to get impacted badly due to spoilage of flower buds.
“The Marathwada region in Maharashtra received extremely below average rainfall this monsoon (June-September 2018). The entire Gujarat received 40 per cent lower rainfall than the long-term average (LPA). While the southern parts eventually received too much of rain, the northern region saw extremely low rainfall. Since Saurashtra contributes 55-60 per cent cotton output in Gujarat, the drought in this region hit cotton crop badly. We,
therefore, estimate cotton output at 32.5-33 million bales this year,” said Biren Vakil, an analyst with Motilal Oswal Financial Services Ltd.
In the case of normal November rainfall, cotton flowers can recover some lost yield in the third cycle which may result in a marginal decline in cotton output this year, Vakil added.
“Big cracks have developed in land across Saurashtra region due to lack of soil moisture following heat waves in the region. Therefore, second and third picking of cotton flowers looks impossible. Farmers have started uprooting plants and clearing the field for rabi crop sowing. Thus, sudden spike in cotton prices looks possible any time soon,” said Atul Ganatra, president, CAI.
Meanwhile, the benchmark variety of cotton i.e. Shankar 6 has been trading in a narrow range of around Rs 13,000 a bale for quite some time now.
According to the Second Advanced Estimate of CAI, total cotton output in Gujarat would stand at 8.8 million bales this year compared to 10.5 million bales during the previous year. Similarly, cotton output in Maharasthra is estimated at 8 million bales this year versus 8.3 million bales last year. Cotton output in Andhra Pradesh is forecast to decline 1.6 million bales this year against 1.85 million bales last year.
Interestingly, the cotton season started with a marginal 1.5 million bales this year compared to 2.3 million bales last year. Amid rising demand from major consuming countries like China due to high import duty levied by the United States under the ongoing trade war, demand from China is set to turn towards India. This means that India’s cotton exports are likely to remain firm this year.
“Rising demand and lower output of cotton may trigger a sharp price rise this year which may dent textile mills’ profit margins in the coming quarters,” said an industry expert.