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With farmers continuing to switch from cotton to more profitable alternatives, India's cotton crop in 2013-14 (cotton year) is likely to fall 170,000 tonnes at 5.7 million tonnes (33.5 million bales), said the International Cotton Advisory Committee (ICAC). The country produced 34 million bales (each 170 kg) in 2012-13.
In its forecast for the crop released on Thursday, ICAC said the cotton crop would fall globally in 2013-14. An estimated 34.1 million hectares of cotton are being harvested in 2012-13, five per cent below the previous season; another five per cent drop to 32.2 million hectares is forecast in 2013-14 (July-June), it said. Accordingly, global output is estimated to decline about five per cent from 27.8 million tonnes to 26.3 million tonnes this season, and world production is forecast to drop another six per cent to 24.6 million tonnes during 2013-14. Between 2012-13 and 2013-14, production in China and the US is forecast to fall by 700,000 tonnes to 6.7 million tonnes and three million tonnes, respectively. China's output fall is also attributed to labour shortages, as farm workers migrate to cities searching for jobs.
Global cotton mill use is rising an estimated seven per cent from 22.1 million tonnes last season to 23.7 million tonnes in 2012-13, and mill use is projected to rise another two per cent to 24.3 million tonnes in 2013-14.
Interestingly, ICAC said Indian mills were likely to use more cotton in the coming quarters. China's cotton use by mills has been falling, as the government there is discouraging cotton processing and mills have been importing more and more cotton yarns. Mill use in China is falling to an estimated 8.3 million tonnes in 2012-13, as the national cotton policy remains unclear. Another drop of 300,000 tonnes to eight million tonnes in 2013-14 is expected, the lowest in 10 years.
China's policy of discouraging cotton processing is bad news for India; traditionally, India exports two-thirds of its cotton to China. ICAC said the "imports by China are estimated at 3.7 million tonnes in 2012/13 and three million tonnes in 2013-14. Because of the Chinese national cotton reserve policy, a seismic shift in the location of world cotton use is underway". In 2012-13, India's cotton exports is expected to be 8.1 million bales, which will get affected next year if China's imports fall drastically as estimated by ICAC.
Falling mill use in China will be partially offset by increases in India, Bangladesh, Turkey and Pakistan.
World stocks are forecast to rise to 18 million tonnes by July 2014, representing about nine months of mill use. ICAC estimates if China's policy remains the same, the Cotlook A Index (representing global cotton price) is projected to average 88 cents and 122 cents a pound in 2012-13 and 2013-14, respectively.
