For the first time, Indian cotton farmers, particularly in Karnataka and Telangana, have begun storing raw cotton (kapas) on their terraces and backyards, waiting to get better prices for their produce.

“I personally saw farmers in 2-3 villages near Raichur in Karnataka storing cotton on their terraces. Similarly, farmers are storing cotton in Yadgir district. A lot of kapas are being held back in many cotton-growing villages,” said Ramanuj Das Boob, a sourcing agent for multinationals in Raichur, Karnataka.

Since the beginning of the current cotton season which began on October 1, 2022, farmers have been holding back their produce as cotton prices have declined by over 40 per cent from the peak of over ₹1 lakh per candy (356 kg) witnessed in May-June 2022. 

Market data

According to data from Agmarknet, a unit of the Agriculture Ministry, cotton arrivals between October 1, 2022, and February 6 were at least 30 per cent lower at 125 lakh bales (170 kg) from 190.5 lakh bales during the same period a year ago. “These farmers had got ₹12,000-13,000 a quintal for kapas last season. This season they are getting ₹8,000 only,” said Das Boob.

Currently, cotton is quoted at ₹61,500 a candy in Gujarat compared with ₹62,500 a week ago. The modal price (the rate at which most trades take place) for raw cotton in Rajakot’s Gondal agricultural produce marketing committee (APMC) yard has dropped to ₹8,205 a quintal from ₹8,405 a week ago. 

In Karnataka APMC yards, prices have dropped to the levels of ₹7,700 a quintal (₹7,900 a week ago). 

Gujarat, the leader

“Farmers all over the country are holding back cotton. That’s why arrivals have been lower this year. This may be new in Telangana and Karnataka, but it is nothing new in Gujarat,” said Anand Popat, a trader in cotton, yarn and cotton waste in Rajkot.

In Gujarat, cotton farmers are holding back at least 75 per cent of their harvested crop. “For years, farmers in places such as Jamnagar have been storing cotton on their terraces. In Saurashtra, too, farmers tend to hold back on their terrace or godowns set up in their houses when they are not happy with the prices,” he said. 

Das Boob and Popat say cotton farmers now have the financial capacity to hold back their produce and sell when prices are bullish. “Only farmers who need immediate cash are selling. Their capacity to hold back has increased after they got good prices last season,” he said. 

Check on prices

For example, farmers who grow the DCH variety in Karnataka are yet to bring out their produce despite a rise in the variety’s acreage. “Last season, farmers who grew DCH cotton got ₹15,000 a quintal,” Das Boob said. One of the reasons for farmers looking for better prices this season is that the crop yield is less.

Prabhu Dhamodharan, Convenor, Indian Texpreneurs Federation (ITF), said with demand challenges continuing in all markets, the lower level of industry utilisation will keep a check on cotton prices. “Alternate low-cost fibres are at an advantage, having taken away the market share of cotton permanently in multiple areas of fashion,” he said. 

However, the entire cotton value chain now are slowly trying to come back towards production from its recent lows as cotton prices have been stable over the past month.  “These realities and the upcoming summer season will enable farmers to bring more cotton to the market in the coming days,” Dhamodharan said.

Inflows on the rise

Popat said cotton arrivals have begun to rise across the country. From 90 lakh bales (170 kg each) a fortnight ago, arrivals are currently at 120 lakh bales. “I expect arrivals to touch 200 lakh bales by the end of this month,” he said. 

Though prices, particularly, in Gujarat may not decline much below  ₹60,000 a candy as export demand has begun to re-emerge, Popat said chances of any sharp rise in prices are remote.

However, cotton prices in Maharashtra are ruling ₹1,000 a candy lower than in Gujarat from having ruled at ₹1,000 higher last season. “Growers in Maharashtra may want to sell their stocks now,” he said. “Probably, this is the best time to dispose of their stocks. But I don’t rule out the possibility of the farmers wanting to sell from June onwards,” he said. 

Looking for lean season

“I expect farmers to sell their produce after March when the lean season begins,” said Das Boob, adding that farmers have been encouraged by the “good support” they are getting from the government through schemes such as the PM Kisan scheme. Maharashtra and Telangana have their own schemes to support growers, he said. 

Das Boob expects the current price trend to continue. Popat said huge stocks are still with the farmers ruling out any surge in the rates.

Poppat said cotton production will likely be 360 lakh bales, higher than the 339.75 lakh bales estimated by the Cotton Association of India and 341.9 lakh bales projected by the Ministry of Agriculture. 

“Export demand has come from Bangladesh. If prices drop a little more compared with the InterContinental (ICE) cotton rates, China could be back to buying Indian cotton. That could leave the market balance tight next season” Popat said.

Currently, cotton in ICE New York for delivery in May is quoted at 85.06 cents a pound (₹55,650 a candy). Prices are lower on weak demand and fears of recession.