The Committee on Cotton Production and Consumption (CCPC), a body set up by the government comprising all textile industry stakeholders including farmers, has estimated cotton production for the current season to September at 337.23 lakh bales (of 170 kg each).

The projection of the CCPC, chaired by the Union Textiles Commissioner on Thursday, is against the 341.91 lakh bales it estimated in November last year. 

The estimate, coming on the heels of traders body Cotton Association of India (CAI) lowering the crop estimate to a 14-year low of 303 lakh bales, has led to confusion over the exact production of the natural fibre this season.

Reflecting reality

“There are various estimates of the cotton crop doing rounds, but the CCPC’s estimate seems to reflect the reality,” said a multinational company (MNC) trading source on the condition of anonymity.

“There is a lot of confusion over cotton crop estimates. Views are also different. In private, MNCs have a different estimate of the crop making it difficult for the industry. If we compare the acreage of cotton and the yield, the estimates do not match,” said a Karnataka-based trader. 

According to CCPC estimates, the area under cotton is higher this season at 130.49 lakh hectares (lh) and the yield has been projected at 439.34 kg/hectare. Last season, cotton was cultivated on 119.10 lh and the productivity was 445 kg/hectare.

Issues with estimates

Production in the northern zone comprising Punjab, Haryana and Ganganagar tracts of Rajasthan, is estimated at 47.25 lakh bales (44.44 lakh bales a year ago). The output in the central zone consisting of Maharashtra, Gujarat and Madhya Pradesh is pegged at 184.16 lakh bales (160.20 lakh bales).

The southern zone made by Telangana, Tamil Nadu, Andhra Pradesh and Karnataka is projected to produce 98.30 lakh bales (100.85 lakh bales). Other parts of the country are expected to chip in with 7.52 lakh bales (6.54 lakh bales). 

“The problem with crop estimates this year is that people have tended to go by the earlier practice of market arrivals. We are going through an unusual year when farmers have tended to hold back their produce. They had never done this before in Karnataka and Maharashtra,” the MNC trading source said. 

Buoyed by receiving record high prices of ₹12,000 a quintal last season, farmers tended to hold back expecting higher prices. According to the Southern India Mills Association (SIMA), farmers and traders have held back cotton this year resulting in raw material availability.

Basing it on arrivals

This year, farmers have not been able to get over ₹9,000 a quintal, though they are higher than the minimum support price of ₹6,080. Currently, the modal price (the rate at which most trades take place) is hovering around ₹8,000. 

Finding fault with some of the lower projections, a trader said, “It is one thing to go by arrivals till now and add the expected arrivals over the remaining period. It is another to estimate crop production taking area, yield and other factors into consideration. 

“The confusion has been caused as some have tended to estimate the crop based on arrivals going by past precedents, but this time they have failed to take into account farmers’ behaviour,” the trader said.

The MNC trading source said currently, cotton arrivals in Maharashtra were over 50,000 bales. “People should have taken note of these arrivals, which is higher than usual while arriving at crop estimates,” the source said.

According to data from Agmarknet, an arm of the Agriculture Ministry, cotton arrivals in the country during March 1-April 21 were 33.72 lakh bales against 22.45 lakh bales in the same period a year ago. 

Prices up this week

“If the agencies estimating cotton production were to allow market conditions to take control, we would not be witnessing such a confusion,” said a southern-based textile industry expert.

CAI’s estimate of a 14-year-low crop has pushed up cotton futures on MCX to ₹64,020 a candy (356 kg) for delivery in June. Spot prices of Shankar-6 cotton, a benchmark for exports, are currently quoted at ₹63,000 a candy. Prices are up by over ₹2,500 this week. 

In the global market, cotton on the InterContinental Exchange, New York, for delivery in May is ruling at 79.05 cents a pound (₹51,350 a candy). This has resulted in the Indian cotton enjoying a premium and, in turn, hurting its export prospects. The US Department of Agriculture has pegged India’s cotton to drop to a 19-year low this year.

“The main reason for the confusion is only due to delayed arrivals as farmers are holding back raw cotton expecting higher prices from the beginning of this cotton season . During the peak period, arrivals were low and now during March-April arrivals are good across the country,” the Karnataka-based trader said. 

2018 experience

He said there was no relevance of month-wise arrivals compared to earlier years and this has made things difficult for agencies concerned to assess the actual crop size. “Production in some States may correct but the problem could be in estimating Maharashtra and Gujarat, where arrivals have been delayed,” the trader said.

The MNC trading source said in 2018, too, cotton production was pegged lower and the following year an one-time adjustment of 13-17 lakh bales were made. “Our fear is that this could recur next season,” the sources said.

The Karnataka-based traders said with the global yarn movement being slow, its exports will likely be 20 per cent lower this year. “In the absence of accurate crop estimates and low demand in finished products, consumption will decline. Even consumption data also need to be addressed properly as there are lots of misconceptions on actual utilisation by spinning mills in various States,” he said.

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