Cotton Production Daily Technical Report 11 March 2019 Commodities

Cotton Association of India has scaled down its estimate for output in 2018-19 (Oct-Sep) to 33.0 mln bales, compared with the final output of 36.5 mln bales last year, largely due to the expectation of a smaller crop in Telangana, Andhra Pradesh, and Karnataka because of scanty rains.

The cotton production in Pakistan up to Feb 15 stood short by 6.83 percent at 10.7 million bales over the corresponding period last year. This is the seventh consecutive year the country is faced with a short crop of around 4.8m bales from a record production of around 15m bales achieved in 2011-12. According to trade sources, in order to meet the shortfall, textile spinners are likely to import up to 3.5m to 4m bales, burdening foreign exchange reserves by around $1 to $1.2 billion.

World supplies of cotton are expected to rise by 1M bales, with production rising globally by 6.8% amid higher crop yields, the USDA said. US production is expected to rise by 22.5M bales, driven by an increase in planted area. Chinese imports of cotton are expected to rise in 2019/20 as well, but not enough to offset the increase in global production.

Cotton futures on ICE traded higher due to optimism over ongoing trade negotiations between the US and China. Investors are now focused on the latest round of trade talks between the two countries. CCI procured about 7 lakh bales of cotton mostly from Telangana (80-85%) as prices slipped below MSP. Of the total quantity of 70k bales have been procured in Maharashtra while another 35k to 40k bales have been bought in Madhya Pradesh.

The ongoing trade tensions between the US and China is creating uncertainty in the global cotton market, affecting the economy. Based on the positive statements from the recent negotiations, the National Cotton Council (NCC) assumes that the additional tariffs being imposed by the 2 countries will be removed in advance of the 2019 marketing year.

Cotton prices are expected to remain firm this year due to lower production in the country, apart from rising consumption in both the domestic and overseas markets. Prices may rise by March end when market dispatches will reduce. A weakening of the rupee will also help overseas demand for India’s cotton exports. According to trade sources, the export business was reported for China, Indonesia, and Bangladesh markets. However, export sales volume still remains nominal. The CAI in its latest estimates the cotton crop for the 2018-19 season is expected at 330 lakh bales of 170 kgs. each which is lower by 5 lakh bales than its previous estimate of 335 lakh bales made during last month. The CAI has reduced the crop estimate for Telangana by 2.50 lakh bales, Andhra Pradesh by 50,000 bales and Karnataka by 2 lakh bales. The main reason for the lower crop is that in the Southern Zone farmers have uprooted their cotton plants due to moisture deficiency as a result of which there are no scope further pickings.

Cotton output in Gujarat is seen declining nearly 50% on year to 5.2 mln bales in 2018-19 (Jul-Jun), according to the second advance estimate of the state farm department. In its first advance estimate in September, the government had projected cotton output in the state at 8.83 mln bales. Below-normal rainfall in key growing regions has resulted in a sharp fall in cotton yield, which is seen falling to 326 kg per ha from 660 kg last year.

So far, farmers across the country have sold about 160 lakh bales from the current crop. There’s still an equal quantity of cotton that farmers will be bringing into the markets over the next couple of months. This is even as ginners are finding it hard to sell the processed cotton because of disturbances in currency and trade war.

US-China trade relations have started to hurt India’s cotton yarn exports and there is a chance of more damage. Chinese importers have renegotiated orders of Indian cotton yarn worth $400-500 million in the past few weeks. The US-China tariff war had benefited India. Between June and September 2018, the US announced high customs duties on several Chinese goods and China retail.

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