Cotton Area in India Climbing for First Time in Three Years

Jun 09, 2014 4:55 am ET

(Updates prices in fifth paragraph.)

June 9 (Bloomberg) -- Cotton seeding in India, the world’s second-largest grower, will probably expand for the first time since 2011 after global prices reached a two-year high in March. Futures in New York declined.

The area may increase by 3.4 percent to 12 million hectares (29.65 million acres) in the planting season that started in May, according to the median of five estimates from growers, exporters and industry groups compiled by Bloomberg. The crop, which will be harvested from October, may be a record for a second year, the Confederation of Indian Textile Industry said, without giving an estimate.

A bigger crop in India, the largest exporter after the U.S., would increase global supplies as demand slows in China, the world’s top importer. Futures in New York tumbled 13 percent from the high in March as improving weather aided late seeding of cotton in Texas and on concern Chinese demand would weaken. Futures in Mumbai rallied to a seven-month high in May.

“Farmers have been happy with the prices they have got and they have very limited alternate crops available,” Nayan Mirani, vice president of the Mumbai-based Cotton Association of India, said by phone on June 5. “Planting is looking positive and should be the same or even more than last year.”

Futures on ICE Futures U.S. slumped 8.5 percent in May, the most since October, and declined 0.3 percent to 84.55 cents a pound today. Prices reached a two-year high of 97.35 cents on March 26. The contract for June delivery on the Multi Commodity Exchange of India Ltd. traded little changed at 19,360 rupees ($328) per bale of 170 kilograms (375 pounds each) today.

Monsoon Worries

Planting began last month in the northern Indian states of Punjab and Haryana, which are irrigated regions, while sowing in the biggest producing states of Gujarat and Maharashtra starts with the onset of monsoon rain this month. The monsoon, which provides more than 70 percent of annual rainfall, will be 95 percent of a 50-year average from June to September, the India Meteorological Department estimates.

“If the monsoon is below normal, the area under cotton will remain the same or even go up because among the competing crops cotton requires the least amount of water,” D.K. Nair, Secretary General of the Confederation of Indian Textile Industry, said by phone from New Delhi. “When there’s a water shortage, more people shift to cotton.”

An El Nino weather pattern may be established by August as Australia remains on alert for the event that brings drought to the Asia-Pacific region and heavier-than-usual rain to South America, the Bureau of Meteorology said on June 3. The event will reduce monsoon rain and crops from cotton to sugar and rice may be hurt, Newedge LLC said in a report dated June 5.

El Nino Impact

Even if El Nino develops toward the end of the monsoon season, output will not be hurt as cotton doesn’t require much moisture, A. Ramani, secretary of the Indian Cotton Federation, which represents 350 spinners, ginners and traders, said by phone from the southern Indian city of Coimbatore last month.

“There are indications that area might increase in Gujarat by 10 percent to 15 percent because the farmers have got good prices,” Shirish Shah, partner at Bhaidas Cursondas & Co., a Mumbai-based exporter, said by phone. Acreage will also climb in Rajasthan, Telangana and Seemandhra states, he said.

Output in the 12 months starting Aug. 1 may be 6.262 million tons, possibly making India the biggest producer ahead of China, Rebecca Pandolph, a statistician at the International Cotton Advisory Committee, said. China’s crop may drop 10 percent to 6 million tons in 2014-2015, the group said.

Exports to China may decline next year as India’s biggest buyer is reducing imports, Ramani said, without providing any estimates. Total imports by China tumbled 64 percent to 222,088 tons in the first three months of 2014, customs data show.

India probably exported 9.5 million bales in the year that began Oct. 1, according to Nair. Shipments totaled 9.8 million bales in 2012-2013, the Cotton Association of India estimates.