Global cotton production will likely be 5 million bales (217.7 kg) lower this season (October 2023-September 2024) as the output in China, the US, Australia and India has been affected. 

Though cotton prices are likely to decline in the current quarter, they are projected to increase in 2024, at least from the second quarter, industry experts and analysts have said.

However, the lower cotton production is unlikely to affect the textiles industry as it is moving towards alternatives such as synthetic and blended fibres. “We expect global (cotton) output to reach 112.1 million bales in the 2023-24 season, down from an estimated production of 117.6 million bales in the 2022-23 season, representing a year-on-year decline of 4.7 per cent. Our view of a downturn in the global production outlook is driven by an expected 12.1 per cent year-on-year (y-o-y) decline in Mainland China and the US, where a sharp decline in the planting area and adverse weather conditions have weighed on production estimates,” said research agency BMI, a unit of Fitch Solutions.

Brazil to offset, partially

Additionally, it estimated a 12.1 per cent slide in Australian output and a 1.9 per cent contraction in Indian production this season. But Brazilian output will partially offset declines elsewhere, with our forecasts indicating a 21.6 per cent y-o-y increase.

“The global market will face a supply shortage this year. But demand is slack as the US, Europe and other developed nations are going through financial problems. People there are not spending much on clothing,” said Rajkot-based cotton, yarn and cotton waste trader Anand Popat. 

“Production in India is lower at 295 lakh bales (170 kg each). But carryover stocks of 25-30 lakh bales last season should help overcome any shortage. Cotton consumption is also slack as mills are shifting to polyester blends,” said Ramanuj Das Boob, a sourcing agent for multinationals based in Raichur, Karnataka.

“The textiles industry is clearly moving towards synthetic and blended fibres, both at home and abroad. This move is picking up speed with higher prices of cotton and artificial fibres such as man-made fibres and cellulosic fibres taking up more space in the market,” said Prabhu Dhamodharan, Convenor, Indian Texpreneurs Federation (ITF). 

Tech advancement to the rescue

The “accelerated shift” will keep a check on cotton prices. “The recent advancement in technology is making synthetic fibres more functional, which makes them strong competitors to cotton,” he said. 

Despite the lower production, BMI has lowered its average price forecast for 2023 to 84 US cents a pound from 86.5 cents, which is marginally above the year-to-date average of 83.8 cents. “Looking ahead to 2024, we maintain our average annual price forecast at 88 cents, representing a year-on-year increase of 4.1 per cent (mainly due to short supplies),” the research agency said.

Adding further support to global prices, it expects global consumption to reach 116.4 million bales in 2023-24, representing a y-on-y growth of 5 per cent and, crucially, leading to a global production balance deficit.

Current prices

Currently, cotton prices on InterContinental Exchange, New York, are quoted at 81.74 cents (₹53,800 a candy of 356 kg) for delivery in March 2024 — the lowest in over three months. In India, benchmark Shankar-6 cotton is quoted at ₹57,050 a candy in Rajkot. 

“Kapas (unprocessed cotton) prices in the domestic market are quoted at ₹7,200-300 a quintal, while cottonseed prices are ruling at ₹3,200-300 a quintal,” said Das Boob. If seed prices drop further, then the Centre could consider minimum support price (MSP) purchases.

The MSP for cotton this year has been fixed at ₹6,620 for medium staple variety. Arrivals are likely to pick up after Diwali and will be steady for two months after that. “We expect cotton prices to rule around ₹57,000-59,000 a candy, though heavy arrivals and slack demand could put pressure on the rates,” the Raichur-based sourcing agent. 

Though the crop is lower, the quality of arrivals is excellent, Das Boob said. 

Caution over fibre choice

Popat said his own estimate of the cotton crop was that it is not lower than 315 lakh bales (170 kg each) and with a carryover stock of 27 lakh bales, domestic demand could be easily met. 

Dhamodharan cautioned that spinning mills and fabric manufacturers in the southern region are thinking twice about depending only on cotton, thanks to its price swings and frequent volatility. “They are now more open to mixing in different fibres, which lets them adapt quickly to any market twists and turns,” he said. 

The ITF convenor said it’s the “right time” for the Indian government to bring a “right balance” in the ecosystem. “We expect its production during the 2024-25 season to ease back by 12.3 per cent, which will lend support to prices throughout the second half of 2024,” BMI said.

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