Cotton production, exports record multi-year decline

Jul 14, 2023 02:52 PM IST

India’s cotton exports and production have recorded a record decline due to weak demand in the West and a shift by farmers to more profitable crops. Concerns are rising that India, one of the world’s largest cotton producers, may become a net importer. The decline in demand is attributed to factors such as lower domestic prices, China’s demand slide, and the US ban on cotton products from China’s Xinjiang region. Uneven rainfall and cultivation shrinkage in some major growing states have also affected cotton sowing and production.


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HT Image

Amid weak demand for textile products in the west due to the long drawn Russia-Ukraine war, India’s cotton exports and production have registered a record decline during the ongoing financial year. Country’s cotton production is concerning as India is among the world’s largest producers of cotton but risks becoming a net importer.

The United States Department of Agriculture (USDA) estimates India’s cotton exports to slip to its lowest in 19 years during the current crop season between October 2022 and September 2023 as it expects farmers to shift to other profitable crops such as oilseeds and pulses. Indian cotton yarn exports had hit a decade-low level of 664,000 tonnes in FY23, compared to the highest exports of 1,389,000 tonnes in FY22.

The value of cotton yarn and handloom products exports fell 14% in May 2023 compared to the comparable period last year. Cotton exports had earlier slipped nearly 75% in FY23 to $678.75 million compared to $2,659.25 million compared to the last quarter.

Notably, cotton yarn manufacturers had witnessed record-high profitability due to strong demand on the back of recovery from covid-19. Besides, experts said demand was also a result of lower domestic cotton prices compared to international prices, and the America’s ban on cotton products from China’s Xinjiang region.

However, the demand came under pressure in FY23 and declining domestic production added to the woes of the industry paving way for fears of India turning into a net importer. It’s worth highlighting that India textile production caters largely to the domestic markets.

Experts also attributed the decline to demand slide in China, witnessing a patchy recovery from covid-19. Historically, China was the largest buyer of cotton yarn from India but post the USA’s ban, Bangladesh took its place and became the largest importer of Indian cotton yarn during FY22 and FY23.

Query sent to the union textile ministry remained unanswered till press time.

According to the latest data by the agriculture ministry, sowing of cotton across India remains 8.5% lower on year at 7 million hectares due to a shrink in cultivation in some major growing states such as Maharashtra, Andhra Pradesh, and Telangana amid patchy rainfall.

Though the category of rainfall in the country turned to normal from deficiency in about 10 days, uneven distribution of monsoon rainfall in these regions remains a concern for cotton cultivation. While rain deficiency in Maharashtra till Thursday was 22%, that was 27% and 14% in Telangana and Andhra Pradesh, respectively.

However, 106% above-normal rainfall pushed up cotton sowing 4.6% year-on-year in Gujarat, the leading largest producer of cotton in India. Plantation of cotton lags 10.4% at 1.7 million hectares in Maharashtra, 2% at 1 million hectares in Telangana and 0.3% at 57,000 hectares in Andhra Pradesh.

As per government’s third advance estimates, cotton production in 2022-23 (July-June) has been 34.3 million bales (1 bale = 170 Kg) as against last year’s 31.1 million bales. However, the Cotton Association of India revised the cotton crop estimates downwards to 29.8 million bales compared with 30.7 million bales predicted in 2021-22.

“Industry faced several challenges in FY23. These included the disparity between domestic and

international cotton prices, a decline in global demand due to high inflation and recessionary pressures in developed economies, and increased energy and supply chain costs,” Care Edge ratings said.

The agency further highlighted that India experienced its lowest cotton yarn exports in a decade, leading to a decline in sales volume and a contraction in the operating profitability margin for cotton yarn spinners in FY23, which remained below the historical average.

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