India's cotton output to retreat from record high

India's cotton production beat expectations this season, but looks like falling further than had been thought in 2014-15 although much will depend on the monsoon, which was forecast on Monday to come in below normal.

Output in the second-ranked cotton producing country hit 30.5m bales, the US Department of Agriculture bureau in New Delhi said.

That is 1.0m bales higher than the department's official estimate, and means India beat by an even bigger margin its previous record harvest, the 29.0m bales produced in 2011-12.

"Record production appears to be a reflection of timely and well-distributed rains during the 2013 monsoon, especially across the major cotton producing states of Maharashtra and Gujarat," the USDA bureau said, citing weakening prices as evidence of the output upgrade.

"Farmgate cotton prices have continually declined since January (see Figure 1b), despite robust domestic mill consumption and strong export shipments, lending support to the notion that supplies are larger than originally predicted."

In fact, exports look like hitting 9.20m bales, some 400,000 bales more than the USDA itself has forecast, second only to the 11.08m bales in 2011-12.

The bureau, noting a "strong pace of shipments", said that exports had reached 429,000 bales, equivalent to 93,500 tonnes, last month alone, with China the top buyer, and Bangladesh and Vietnam consumers also making strong purchases.

Next season

However, the bureau was more downbeat on prospects for 2014-15, estimating production at 28.0m bales, 500,000 bales below the official USDA estimate.

The bureau, which noted that sowings were preceding at an "average" pace, in line with that last year, gave no reason for its forecast.

Much will depend on the progress of the monsoon, over which there have been concerns because of the likelihood of an El Nino weather pattern, linked to dryness in much of Asia including India, setting in this year.

In 2009, during the last El Nino, India suffered its weakest monsoon in more than 30 years, with rainfall 22% below normal.

Monsoon update

In fact, Earth Sciences Minister Jitendra Singh on Monday said that monsoon rains would be below normal this year.

"The monthly rainfall over the country as a whole is likely to be 93% of the average in July and 96 percent of the average during August," Mr Singh said.

In the north west of India, including Punjab, Rajasthan, Uttar Pradesh, major areas for growing cotton as well as rice and sugar cane, rains will be 85% of the long-period average.

The monsoon had already been raising concerns over its slow progress, and was viewed last week as running some five days behind normal, although progress in Kerala is believed to have picked up pace over the weekend.

Currency factor

The USDA bureau also flagged an extra setback to farmers in a rising rupee, which is curtailing India's strong export pace.

"Indian ex-gin cotton prices are now higher than the Cotlook A index as the rupee has strengthened in the last month and reduced the thin margins for the exporters," it said.

The premium to the Cotlook A, a benchmark measure of physical prices, "suggests that the 2013-14 export juggernaut will start to wind down".

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