Higher prices despite bumper crop

KHARIF CROP SURVEY: COTTON

Riding on surging yield of Bt variety, cotton is set for yet another bumper crop this year. In kharif 2007-08, the harvest is estimated to cross 30 million bales, which is over 10 per cent more than last year's 27 million.

The good news is that prices are not expected to fall from the current levels as demand is expected to rise "� both from domestic as well international markets.

Last year saw consumption by mills rising. The trend is expected to continue in the coming days, with modern technology and incentives under the Textile Upgradation Fund Scheme (TUFS) helping mills to produce more.

Leading industrialists, government agencies and traders say that the yield is also on the higher side, thanks to an annual increase in the use of Bt cotton. The average yield is expected to be around 540 to 550 kg a hectare -- up 5.7 per cent from last year's 520 kg a hectare.

All this has resulted in a higher acreage this season. The total acreage is expected to be around 9.5 million hectares against last year's of 9.1 million hectares, a 4.83 per cent rise.

Central India will continue to top the chart, with production at around 20 million bales. Gujarat alone is expected to add 11 million. While production from the northern region may hover around 5.6 million, the south is expected to contribute 5 million bales.

Robust demand
With an expected increase in production, consumption too is set to scale up further. Domestic mills consumed around 22 million bales last year which is expected to increase to around 24 million bales this year.

Estimates suggest that the country will be able to export close to 7 million bales this season, with the bulk heading towards China. Last year, India exported around 3.5 million bales to China, which is expected to touch 4.5 million bales this year.

Price trends
The crop has begun arriving across the country, but the momentum is yet to pick up. Around 80-90 per cent of the crop arrives during the first six months of the season (November-April).

Industry experts believe the crop could face pressure in December and January, but will firm up later on the back of global cotton scarcity.

"I do not see a downside of more than Rs 500 a candy (356 kg) for this season. The market should remain mostly stable with a narrow fluctuation of 2-3 per cent, unless there is an unusual demand for the Indian cotton from the global market," says K F Jhunjhunwala, president, Cotton Association of India.

Subhash Grover, managing director, Cotton Corporation of India, agrees. He sees China as a big importer, pushing up global prices by 3-4 cents a pound. In the domestic market, it could lead to a rise of Rs 1,000-1,200 a candy, he adds.

Farmers benefit
The 2007-08 season has seen a hike in the Minimum Support Price (MSP) for different varieties of cotton seeds. In the case of S-6 cotton from Gujarat, the MSP has been raised by 2.5 per cent, whereas Karnataka's DCH-32 variety saw an 11 per cent increase in the MSP.

According to P D Patodia, chairman, Confederation of Indian Textiles Industry (CITI), "The prevailing market prices meet the expectations of farmers. Prices in the past two seasons provided an incentive for farmers."

R K Dalmia, president, Century Textiles and Industries, says farmers' income has increased due to an increase in the yield.

(Inputs from Soumitra Trivedi)