Global cotton production is likely to decline by 5 million bales (217.7 kg) this season (October 2023-September 2024) as production in China, the US, Australia and India is affected.
However, industry experts and analysts have said that cotton prices are likely to decline in the current quarter, but are expected to rise from at least the second quarter of 2024.
However, lower cotton production is unlikely to impact the textile industry as it is moving towards alternatives such as synthetic and blended fibres. “We expect global (cotton) production to reach 112.1 million bales in the 2023-24 season, lower than the estimated production of 117.6 million bales in the 2022-23 season, indicating a decline of 4.7 per cent year-on-year . Our outlook for the global production outlook is driven by an expected decline of 12.1 per cent year-on-year (y-o-y) in mainland China and the US due to a sharp decline in planted area and adverse weather conditions. Due to which production has been affected. Estimates,” said research agency BMI, a unit of Fitch Solutions.
Brazil will partially offset
Additionally, Australian production is projected to decline by 12.1 percent and Indian production will contract by 1.9 percent this season. But Brazilian output will partially offset declines elsewhere, with our forecasts indicating growth of 21.6 percent year-on-year.
“The global market will face a supply shortage this year. But demand is sluggish as the US, Europe and other developed countries are going through financial problems. People there are not spending much on clothes,” said Anand Popat, a Rajkot-based cotton, yarn and cotton waste trader.
“Production in India is less than 295 lakh bales (170 kg each). But the carryover stock of 25-30 lakh bales from the last season will help overcome any shortfall. Cotton consumption is also down as mills are shifting towards polyester blends,” said Ramanuj Das Boob, a sourcing agent for multinational companies based in Raichur, Karnataka.
“The textile industry is clearly moving towards synthetic and blended fibers both in the country and abroad. The move is accelerating with higher prices of cotton and artificial fibers such as man-made fibers and cellulosic fibres, which are taking up more space in the market,” said Prabhu Dhamodharan, convener of the Indian Textiles Federation (ITF).
technological advancement for protection
“Quick change” will keep cotton prices under control. "Recent advances in technology are making synthetic fibers more functional, making them stronger competitors to cotton," he said.
Despite lower production, BMI cut its average price forecast for 2023 to 84 US cents per pound from 86.5 cents, slightly above the year-to-date average of 83.8 cents. “Looking out to 2024, we maintain our average annual price forecast at 88 cents, which represents a 4.1 percent increase year-over-year (primarily due to lower supply),” the research agency said.
Providing further support to global prices, it is expected that global consumption will reach 116.4 million bales in 2023-24, representing a year-on-year increase of 5 percent and, importantly, global production. Causes loss of balance.
Current price
Currently, cotton prices on the Intercontinental Exchange, New York, for delivery in March 2024 are quoted at 81.74 cents (₹53,800 per candy 356 kg) - the lowest in three months. In India, the benchmark Shankar-6 cotton price in Rajkot is ₹57,050 per candy.
“Cotton (unprocessed cotton) prices in the domestic market are at ₹7,200-300 per quintal, while cottonseed prices are at ₹3,200-300 per quintal,” Das Boob said. If seed prices fall further, the Center may consider Minimum Support Price (MSP) procurement.
This year the MSP of cotton has been fixed at Rs 6,620 for the medium staple variety. The arrivals are likely to increase after Diwali and will remain stable for two months thereafter. “We expect cotton prices to remain around Rs 57,000-59,000 per candy, although heavy arrivals and sluggish demand may put pressure on rates,” said a Raichur-based sourcing agent.
Although the harvest is low, the quality of arrivals is excellent, Das Boob said.
Caution on fiber selection
Popat said his own estimate of the cotton crop is not less than 315 lakh bales (170 kg each) and with the carryover stock of 27 lakh bales, the domestic demand can be easily met.
Dhamodharan cautioned that spinning mills and textile manufacturers in the southern region are thinking twice about relying solely on cotton, due to its price fluctuations and persistent volatility. “They are now more open to mixing in different fibers, which allows them to adapt quickly to any market fluctuations,” he said.
The ITF convener said it is the "right time" for the Indian government to bring the "right balance" to the ecosystem. "We expect production to decline by 12.3 percent during the 2024-25 season, which will support prices in the second half of 2024," BMI said.
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