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India's Cotton Area Seen Rising 15 Percent to 3-year High as Prices Rally

The specialty chemical product represents a downstream value addition to Tata Chemicals' soda ash business, where it ranks among the top manufacturers globally.

Reuters

Updated:May 10, 2017, 8:49 PM IST
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India's Cotton Area Seen Rising 15 Percent to 3-year High as Prices Rally
A worker fills a vacuum pipe with cotton to clean it at a cotton processing unit in Kadi town in Gujarat.

MUMBAI: Cotton planting in India, the world's biggest producer of the fibre, is likely to rise by 15 percent in the 2017/18 marketing season to a three-year high as farmers switch away from other crops, likely boosting cotton production and exports.

Higher output in India could kill a rally that pushed global cotton prices to their highest in three years this month.

"This year farmers received higher prices, so they are going to raise the area under cotton. We are expecting around a 15 percent increase," said Mekala Chockalingam, chairman of the state-run Cotton Corporation of India (CCI), the biggest cotton buyer in the country.

Domestic cotton prices rose 19 percent from a year ago to 41,300 rupees ($639) per 356 kg candy, following the rally in overseas prices.

A candy is a traditional measure of mass in India.

A 15 percent rise in crop area would lift India's cotton planting to around 12.08 million hectares (29.9 million acres) in the marketing year starting on Oct. 1, highest since the 2014/15 year.

That compares to 10.5 million hectares in the current marketing year, the lowest in seven years.

"We have lost area in the last few years. We will recover that lost area as long as the monsoon is normal," said Nayan Mirani, president of Cotton Association of India.

Most Indian farmers start planting cotton - a crop that requires lots of moisture - with the onset of monsoon rains in June, although some with irrigated fields start as early as May.

India looks likely to receive above average monsoon rainfall as concern over the El Nino weather condition has eased, the chief of India's weather office said on Tuesday.

Oilseeds and pulses compete with cotton in key producing areas like the western states of Maharashtra and Gujarat.

Prices of oilseeds and pulses plunged as much as 60 percent due to bumper production this year, which will force many of them to switch to cotton, said Chirag Patel, chief executive officer at Jaydeep Cotton Fibers Pvt Ltd, a leading exporter.

India, which competes with Brazil, the United States and African countries in the world market, is estimated to have produced 35.1 million bales in 2016/17, up 3.8 percent from the previous year, according to the state-run Cotton Advisory Board.

Pakistan, Bangladesh, China and Vietnam are key buyers of Indian cotton.

However, in the last few months Indian textile mills have been aggressively importing cotton due to an appreciation in the rupee. The country is likely to import a record 3 million bales in the current year.

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