Commodities

India bucks global cotton trend with production set to rise to 6.2 mt

Rutam Vora Ahmedabad | Updated on October 12, 2020 Published on October 12, 2020

ICAC sees global output declining by 5% which may boost India’s export prospects

At a time when the global cotton output is expected to decline, India remains the only major producer which is likely to see a rise in the production, projected International Cotton Advisory Committee (ICAC).

In its cotton monthly report for October, ICAC noted that for the season 2020/21, global production has been revised down to 24.6 million tonnes (mt) from 2019-20 estimate of 26.02 mt — a drop of 1.42 mt or about 5 per cent.

Bright prospects

The estimates have been lowered for almost all major producers except for India where production is expected to increase to 6.2 mt based on expanded planted area. In 2019-20, ICAC projected India’s cotton output at 6.07 mt.

But the estimate is seen supporting Indian cotton industry. The global consumption data show a brightened export prospects for Indian cotton.

“Global consumption estimates for 2020/21 remains at 24.3 million tonnes at this early stage of the season and phase of recovery,” ICAC noted, indicating about 1.4 mt of rise as against 2019-20 consumption projections of 22.87 mt.

“India’s increased production in 2020/21 should decrease imports and provide additional opportunities for exports,” an ICAC note said.

As per the ICAC estimates, China is set to lead the global cotton consumption at 7.8 mt — equivalent to 30 per cent of total global consumption.

The consumption in India is expected to be at 5.1 mt for the current season. This makes China and India together representing half of global cotton consumption.

Higher prices

However, the Cotton Association of India (CAI) has expressed fears of losing the export opportunity amid higher domestic prices. In his address on the world cotton day on October 7, Atul Ganatra, President, CAI, said: “In year 2020/21, the biggest cotton challenge for Indian cotton trade is going to be higher cotton MSP i.e. ₹5,850 per quintal. If ginners buy cotton at the MSP, the costs will work out at around ₹46,000-50,000 per candy.”

Ganatra stated that even if the farmers sell their cotton at 10 per cent discount from the current MSP, the cost of cotton would work out to around ₹40,000-43,000 per candy. This is seen hampering export prospects due to higher local prices.

“We have to wait one month to arrive at the correct market idea and see how and where the Indian cotton market will go,” Ganatra said.

As per the ICAC Secretariat’s current global cotton price projection for the year-end 2020/21 average of the A Index is 67.4 cents per pound this month.

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Published on October 12, 2020
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