Indian Cotton Production in 2017/18 Trimmed Post PBW

MUMBAI(Commoditiescontrol): The Pink bollworm(PBW) attack on Maharashtra is likely to eat up 27 percent of the total estimated crop in 2017/18 season however large supply attributed to 74 percent of the crop left to arrive in the market could limit the upside.

The PBW has demolished all hopes of Indian cotton production reaching record high of 400 lakh bales of 170kg each in 2017/18 amid a 20 percent, y/y, increase in cotton area at 123 lakh ha.

Nearly 20-30 percent of the cotton planted area at 42 lakh ha in Maharashtra has been the victim of PBW. Speculation raised fear of large sum of deterioration in the full flowered cotton boll thereby dropping yield and shortage of premium variety lint in 2017/18 season. (Full Report)

After a recent field survey conducted by commodities control team across Vidharbha and Khandesh region of Maharashtra, the cotton crop is likely to face drop in quality and yield this season however the increase in cotton area will compensate for the magnitude of loss due to PBW.

Maharashtra cotton production is expected to average at 80 lakh bales which is 27 percent lower than earlier estimates of 110 lakh bales and will also decline 20 percent from last season at 100 lakh bales. The state will face 10 to 15 percent shortage of long staple variety cotton(30mm+) while the medium to long staple (28-29mm) cotton would likely face variation in quality, color(Rd) and lack consistency. The current distribution of reflectance(Rd) value ranged between 60-70, which was below normal levels of 72-78.

Anil Somani, Managing Director, Rohit Ginning & Pressing Industry and Director, All India Cotton Ginning Association, estimates Indian crop production post PBW at 345 lakh bales, down 11.5 percent from prior estimate of 390 lakh bales and Maharashtra crop at 87 lakh bales from previous 115 lakh bales. "We have considered the quality and crop loss from the Pink Bollworm pest attack and accordingly revised the production at 345 lakh bales."

"Further, due to uprooting of PBW affected crop making it ineligible for additional picking process, the production of the inferior ‘furdar’ variety cotton would drop significantly in the range of 5-7 lakh bales from the normal average production of 20-25 lakh bales in Maharashtra."

The Maharashtra government has recommended all PBW affected farmlands to either be uprooted or burned by December 31, thereby, making it ineligible for third and fourth picking later during the season. The official survey is underway and figures on extend of loss would be available on survey completion.

Further, an agricultural expert also recommended, in a personal interview conducted by commoditiescontrol, “ to avoid withholding raw cotton harvested in the field by farmers and sell it to ginners who would later crush seed during the ginning process, thereby killing the growth of the PBW in the crop. Because no amount of pesticides would kill the PBW and it is considered as one of the most contagious pest in cotton history if not destroyed". However, this seems rather easy theoretically than in practical scenario.

A similar scenario is speculated across major South Indian markets, which was another victim of PBW. Telangana, Andhra Pradesh and Karnataka, contributing 30.13 lakh ha(25%) of the country’s planted area at 122.59 lakh ha, were the major markets affected from PBW, with the first two states said to be affected the most.

Early estimates speculated that nearly 25-35 percent of the total planted area at 19.08 lakh ha in Telangana is affected from PBW. The scenario across South India is unclear to predict production figures at this point however we have considered an average 15 percent drop in yield across Andhra Pradesh and Telangana to derive the production figures.

How would this affect the price going forward?



Spot prices will all depend on the supply going forward looking at the domestic fundamental factor as more or less at 22 lakh bales(28%) of the total estimated production in Maharashtra has arrived in the market as of December 20, leaving nearly 72 percent of crop to arrive in the next 10 months of the season.

Due to speculation there is wide range of production figures voiced out in the market with estimates as low as 300 lakh bales. However, data collated from a number of trade sources, narrowed production estimations to 350 lakh bales, revised down from prior estimate of 370 lakh bales(last 5 year average). Despite, downward revision, production remains higher compared to 2016/17 at 330 lakh bales.

Reputed government agencies and traders have estimated cotton production ranging between 370-380 lakh bales as of date. But we expect further downward revision over the same.

Previously, cotton prices trended in a narrow range of Rs 37,000-38,500/candy during the month of Oct-Nov amid speculation of loss due to PBW. However, since the beginning of December, prices breached the consolidated pattern and surged nearly 6 percent to near Rs 40,000/candy mark in a matter of two weeks.

Factors such as speculation of drop in domestic cotton production, rise in US cotton futures, tight selling from farmers quoting higher rates on upwards of Rs 5,000/quintal, good demand from exporters and local spinning mills, abolishment of cotton imports restriction from Pakistan, etc, were the contributing factors to the 6 percent upsurge in Indian cotton prices. (Full Report)

The total all India crop supply has reached 91 lakh bales as of December 20, that is nearly 26 percent of the total estimated production at 350 lakh bales, leaving around 74 percent of the crop left which is huge sum to arrive in the market.

Rise in supply in January, shortage of premium variety cotton leading to rise in imports speculation and weak technical indicators were pointing to a curtailment of bulls limiting upside in Indian cotton prices. Demand from local spinners remained limited, with major buying seen by MNCs who deal in exports during the month of November December and if the trend persists then supply will supersede demand.

With most factors pointing to a bear side, cotton prices would likely witness correction in the near term, first phase of which is seen during the current week(Dec 18-22) and could trend in a sideways pattern of Rs 38,000-41,000/candy.

However, the global factors played a role in influencing domestic cotton prices in the past few years. If US cotton market persists uptrend amid various supporting factors then the correction in prices could be restricted and uptrend could resume in line with the rise in US cotton market.

The beginning of 2018 will lift the veil over the availability of premium variety cotton and what remains to be seen is whether Indian cotton price will trend on quality, supply or global market sentiment going forward.



Note: The scenario in Andhra Pradesh, Telangana is not completely clear and hence we would provide an updated report as further details come to light.

(By Commoditiescontrol Bureau; +91-22-40015534)