February 29, 2012

As a price fall has made the fibre less attractive compared with crops such as oilseeds and rice, Indian farmers may plant cotton in 5-10% less area in the next season, industry executives said Tuesday (Feb 28).

Cotton prices have dropped more than 40% in India over the past one year--to INR34,000 (US$694) per 356 kilogrammes from INR58,000 (US$1,183) for the widely traded Shankar-6 variety. Prices of rice and oilseeds have risen about 8-10% during the period.

The price fall for cotton will likely discourage farmers who had planted it in 12.19 million hectares in the previous season--a 10% gain on year--when crop damage in China and Pakistan had affected global supplies and drove up prices.

"The farmers were expecting prices similar to last year, but didn't get their required price," said M.B. Lal, managing director of Shail Exports Pvt. Ltd., a large Mumbai-based trading firm. "That might be an inclination to switch to other crops."

Cotton planting commences toward the end of March, starting with Punjab and Haryana states which have well-developed irrigation networks. Other states such as Gujarat, Maharashtra and Andhra Pradesh, the top three producers in that order, wait for the June-September monsoon rains for sowing to start.

Abundant rains in the last monsoon season and higher acreage have boosted cotton output. The government's Cotton Advisory Board expects India's cotton production in the current marketing year that started October 1 at a record 34.5 million bales--each weighing 170 kilogrammes--and exports at 8.4 million bales.

The government had lifted all restrictions on the fibre's exports this marketing year as cash-strapped local textile mills were finding it tough to buy the commodity. But the move hasn't helped much as international prices too have been low with the onset of the economic slowdown.

Prices are unlikely to improve due to large stocks, said Shirish Shah, a director at the Cotton Association of India. That is prompting farmers to consider other crops.

"In Maharashtra, farmers may shift to oilseeds and pulses, while in Punjab they may shift to paddy," said A. Ramani, secretary at the Indian Cotton Federation. Punjab is India's fourth largest cotton producer.

In Gujarat, however, the area is likely to remain steady, Ramani added.