More cotton farmers holding on to their produce has triggered speculation over the actual production of cotton this season (October 2022-September 2023). Some traders and trading houses say production this season may be higher than the estimates made by the Centre and various other stakeholders.

An industry experts team visited Maharashtra during the weekend and found that farmers are holding on to their produce, expecting better prices. This is being corroborated by trading houses, too. 

The development follows a businesslinereport that cotton growers in Telangana and Karnataka are storing their produce on their terraces. 

More than Gujarat 

“Yes, farmers are holding the stocks not only in Maharashtra but in other major cotton-producing States in anticipation of higher prices,” said Sanjay Gupta, MD and CEO of NCML. 

“Maharashtra farmers were least expected to hold on to their produce. If they too are not releasing their stocks, then there are chances of production being higher,” said a trader, without wishing to identify.

“This season, farmers in Maharashtra have held back more cotton than growers in Gujarat,” said Rajkot-based Anand Popat, a trader in cotton, yarn and cotton waste.

Making things difficult

But small and marginal farmers have released their produce in the market to recover their expenses whereas, financially stable farmers are holding the majority of their stock, said Gupta.

“Everywhere, farmers are holding on to cotton. It is making the trade difficult to estimate what the crop could be,” said Ramanuj Das Boob, a sourcing agent for multinationals in Raichur, Karnataka.

On Tuesday, the Ministry of Agriculture lowered its cotton crop estimated to 337.23 lakh bales (of 170 kg each) from 341.91 lakh bales projected earlier. The US Department of Agriculture, in its latest outlook on cotton, has pegged Indian production at 326.58 lakh bales.

Weather impact?

While Popat stuck to his initial estimate of 360 lakh bales, Gupta said NCML expects production to be in the range of 310-315 lakh bales, which is considered on the lower side. “Erratic weather conditions along with pest infestations have caused serious damage to the crop,” the NCML MD and CEO said.

On Tuesday, the Cotton Association of India (CAI), a trade body, lowered the cotton crop estimated to 321.50 lakh bales. Trading houses, too, are of the view that production may be around levels of 350 lakh bales. 

“Some people tend to go by the arrivals in markets and the bales pressed by ginning mills. You need to take into account the volume farmers are holding,” said Popat. 

The Rajkot-based trader said this season, however, only 340 lakh bales of cotton might be pressed and growers could be carrying over 20-30 lakh bales with them to the next season.

Longer season

“Even if the crop is 330 or 340 lakh bales, some 160-175 lakh bales have to arrive by June. This means daily arrivals of 1.4 lakh bales,” said Das Boob. 

According to Popat, daily arrivals of cotton currently are between 1.25 and 1.5 lakh bales. “Barring a handful, most ginning mills may have to shut during monsoon. With arrivals being slow, not all the harvest cropped will be ginned this season,” he said. 

CAI has estimated cumulative arrivals till January 31 at 115.70 lakh bales. 

“We are expecting a much longer season due to gradual arrivals and not expecting any big volatility in prices. Farmers have also started sensing the stability factor both in international and Indian markets and are gradually stepping up the deliveries,” said Prabhu Dhamodaran, Convenor, Indian Texpreneurs Federation. 

Popat said farmers have “fixed their thoughts at a particular price range” and they would not part with their produce below that. 

Signs of flatish trend

Dhamodharan said due to the continuation of weak signals and calibrated buying pattern from retailers, mills are not stepping up their purchases to store cotton as in the previous years. They are careful in their daily purchases decision, he said. 

“Demand for yarn is picking up. Soon, we will see demand for cotton increasing,” Poppat said. 

“We are witnessing a natural balance in the ecosystem and we believe this stable trend will continue for a few more months and that will be good for the exporters,” said the ITF Convenor. 

Popat said the difference between March and July cotton contracts on InterContinental Exchange (ICE), New York, has dropped to a meagre one US cent. “This rules out any bullish run for now. Prices may rule flat,” he said. 

On Tuesday, cotton on ICE was quoted at 85.13 cents a pound (₹55,750 a candy) for March delivery. May and July contracts ruled at 85.33 cents and 85.74 cents, respectively.

In the domestic market, ginned cotton in Rajkot was quoted at ₹63,000 a candy (356 kg), up ₹1,000 from a week ago. At Rajkot agricultural produce marketing committee yard, raw cotton (kapas) was quoted at ₹8,125 a quintal, almost unchanged from a week ago. 

Export demand has begun to pick up with 50,000 to one lakh bales of cotton going to Bangladesh from Maharashtra, Odisha and Andhra Pradesh. 

Cotton exports are projected to drop to 30 lakh bales this season from 43 lakh bales last season.

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