Cotton production and exports show multi-year decline

India’s cotton exports and production have seen record declines in the current fiscal year amid weak demand for textile products in the West due to the protracted Russia-Ukraine war. The country’s cotton production is a concern as India is among the world’s top cotton producers but risks becoming a net importer.

The United States Department of Agriculture (USDA) estimates that India’s cotton exports will fall to a 19-year low during the current harvest season between October 2022 and September 2023 as it expects farmers to switch to other profitable crops such as oilseeds and legumes become. Indian cotton yarn exports hit a decade-low in FY23 at 664,000 tons, compared to the highest exports of 1,389,000 tons in FY22.

The value of exports of cotton yarns and handwoven products decreased by 14% in May 2023 compared to the same period last year. Earlier in fiscal 23, cotton exports fell nearly 75% to $678.75 million, compared to $2,659.25 million last quarter.

Cotton yarn manufacturers in particular have seen record-breaking profitability due to strong demand as the Covid-19 recovers. In addition, experts said the demand was also due to lower domestic cotton prices compared to international prices and the American ban on cotton products from China’s Xinjiang region.

However, demand came under pressure in fiscal 2023 and falling domestic production exacerbated the industry’s woes and paved the way for fears that India could become a net importer. It should be emphasized that textile production in India is largely geared towards the domestic market.

Experts also attributed the drop to falling demand in China, which has seen a patchy recovery from Covid-19. Historically, China was the largest buyer of cotton yarn from India, but after the US ban, Bangladesh took its place and became the largest importer of Indian cotton yarn in FY22 and 23.

The request to the union’s Textile Ministry remained unanswered at the time of going to press.

According to the latest data from the Ministry of Agriculture, cotton sown across India at 7 million hectares remains 8.5% down year-on-year as cultivation has declined in some major growing states such as Maharashtra, Andhra Pradesh and Telangana due to erratic rainfall.

Although rainfall in the country normalized from scarcity to normal in about ten days, the uneven distribution of monsoon rainfall in these regions remains a problem for cotton growing. While Maharashtra’s rain deficit was 22% as of Thursday, Telangana was 27% and Andhra Pradesh was 14%.

However, the 106% above normal rainfall boosted cotton planting in Gujarat, India’s largest cotton producer, by 4.6% year-on-year. Cotton cultivation lags behind at 1.7 million hectares in Maharashtra, down 10.4%, at 1 million hectares in Telangana, down 2%, and at 57,000 hectares in Andhra Pradesh, down 0.3%.

According to the government’s third forecast, cotton production in 2022-23 (July-June) was 34.3 million bales (1 bale = 170 kg), compared to 31.1 million bales last year. However, the Cotton Association of India revised down estimates for the cotton harvest to 29.8 million bales, compared to 30.7 million bales forecast for 2021-22.

“The industry faced several challenges in FY23. These included the discrepancy between domestic and international cotton prices, a drop in global demand due to high inflation and recessionary pressures in developed economies, and increased energy and supply chain costs,” the Care Edge ratings read.

The agency also highlighted that India saw the lowest cotton yarn exports in a decade, leading to a decline in sales volume and a decline in cotton yarn spinner operating profitability margin in FY23, which remained below historical averages.

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