India’s cotton output to decline to lowest in five years

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India’s cotton output is likely to decline by 12.44% to hit the lowest in five year for the current crop year (October 2015-September 2016) on crop damage in major producing states, including Punjab and Haryana.

The Cotton Advisory Board (CAB) under the aegis of the Ministry of Textiles on Wednesday revised downwards its own forecast made in February due to the picture getting clear by the day with almost accurate figures coming from distant cotton growing zones of India. With this revision, therefore, cotton output in India is estimated at 33.8 million bales for the current crop year as against 38.6 million bales produced in the previous year. CAB in February this year had forecast India’s fibre output at 35.2 million bales. Cotton yield was also hit in many states due to drought last year.

Estimates of lower cotton output has resulted in the benchmark Shankar 6 variety recording a sharp jump of 35% over the last five months. Trading currently at Rs 12,710 a quintal, Shankar 6 cotton hit the highest price level since October 2013. Rising prices of cotton would make garments costlier, thereby, hitting the common man hard.

“In the CAB meeting today, India’s cotton output is estimated at 33.8 million bales for the current crop year as against 38.6 million bales in the previous year. The lower output was estimated because of whitefly attacks in Punjab which affected the yield and thereby overall production,” said Kavita Gupta, Textiles Commissioner, Government of India.

Cotton crop in Punjab was affected due to whitefly attack in the entire boarder states. Consequently, overall cotton output in Punjab was esatimated at 7.50 lakh bales for the season 2015-16, compared with 13 lakh bales in the previous year. Haryana also reported a massive crop damage, resulting into the fibre output in the state declining to 15 lakh bales this year as against 23 lakh bales during the previous year. Cotton output is also estimated to decline in Gujarat and Maharashtra by 16% and 6% to 94 lakh bales and 75 lakh bales, respectively.

“Rising cotton price is set to make Indian apparel costlier, which would hit India’s competitiveness in the world market. With Rs 6,000 crore of special package approved by the Ministry of Textiles, which offers incentive to local producers to reduce cost of production, a part of which will be nullified by rising cotton prices,” said Rahul Mehta, President, Clothing Manufacturers Association of India (CMAI) on the sidelines of 63rd Garments Fair here on Wednesday.

The government has set a target of $50 billion for financial year 2016-17 as against $38 billion achieved in the previous year.

Meanwhile, an ICRA study said that the spurt in domestic cotton prices, which have now surpassed international cotton prices, will adversely impact yarn demand and profitability of spinning companies in the second quarter of the current financial year.

“The spurt in the price of cotton is beyond expectation and points to a severe shortage of cotton in the domestic market. Slower cotton sowing and decline in cotton sown area; apart from cotton stocking by intermediaries, could have led to this sharp rise in prices. However, the recent increase in cotton prices can motivate farmers further and the cotton sowing area can improve in the coming months,” said Anil Gupta, VP, Corporate Sector Ratings, ICRA.

A slow growth in domestic consumption and stagnation in exports are likely to adversely impact demand and export competitiveness of the Indian yarn.

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