Bloomberg News

Cotton Planting in India Seen Lower First Time in Four Years

April 10, 2012

Cotton planting in India, the second-biggest producer, will decline for the first time in four years as a ban on exports may spur farmers to switch to other crops, according to the Cotton Association of India.

The acreage may fall about 15 percent in the season starting this month, President Dhiren Sheth said in a phone interview from Mumbai today. Farmers sowed cotton to a record 12.2 million hectares (30.12 million acres) in 2011-2012, harvesting 34.5 million bales, according to the country’s Cotton Advisory Board. Sheth’s forecast is more than the 10 percent decline estimated by the U.S. Department of Agriculture.

A smaller Indian harvest may potentially reduce exports next year, and stem the 53 percent plunge in futures in New York in the past year. The South Asian country won’t allow fresh exports this season as it builds reserves for the domestic textile industry, Trade Minister Anand Sharma said yesterday.

“Due to the flip-flop in export policy, we believe that the next season area might fall, and overall production may get affected,” said Ajitesh Mullick, associate vice president for agriculture research at Religare Commodities Ltd. “The government may put in some limits for exports next year and the total exportable quantity might be lower.”

India’s cotton crop in 2012-2013 may fall to 32.3 million bales of 170 kilograms each from 34.3 million bales this year, according to a USDA report on March 30. Sheth didn’t give a production estimate.

Chinese Protests

India barred all exports on March 5 to secure domestic supplies after shipments surged before the ban to about 9.5 million bales, more than the 8.4 million bale surplus the government estimated. The curbs were partially ended a week later after protests from growers, traders and China, the biggest buyer. The government is scrutinizing about 2.5 million bales registered with the trade ministry prior to the ban, Sharma said yesterday.

“We are very disappointed and we are going to urge the government to open up fresh exports very soon,” Sheth said. “Mills can buy cotton and stock it if they want. Why should the government stop exports?”

Cotton Corp. of India, a state-owned company, will buy 2.5 million bales from farmers at market prices to help domestic mills meet fiber demand, the textile ministry said on April 4.

The May-delivery contract gained as much as 1.4 percent to 90.76 cents a pound in on ICE Futures U.S. and was at 90.55 cents at 4:33 p.m. in Mumbai. Futures slumped 30 percent in the past year on the National Commodity & Derivatives Exchange.

Lower domestic prices may prompt farmers in Andhra Pradesh and Karnataka state to switch from cotton to spices such as chilli because of higher prices, Religare’s Mullick said.

“Farmers are likely to switch to competitively-priced alternative crops while seeking to diversify their crop mix and risk in response to India’s topsy-turvy cotton export policies,” the USDA said. High prices for peanuts, soybeans and corn may encourage farmers to shift away from cotton in central, western and northern India, it said.

To contact the reporter on this story: Swansy Afonso in Mumbai at safonso2@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net


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