Thanks to lacklustre rainfall throughout July and August, the main planting times for cotton, the cotton production in India may fall by 1 per cent year-on-year to 28.3 million 480 lb bales in 2021-22 (previously 2 per cent growth).
Fitch Solutions, a leading American credit rating agency, has claimed the same.
Rainfall in Gujarat, which is India’s top producing state, is almost 30 per cent below its long-term average as of mid-September, which has reduced the area available for planting and weighed on yields.
On the other hand, the recent outbreak of pink bollworm in Bhatinda and Mansa of Punjab will probably also act as a drag on yields.
Nevertheless, the production should bounce back in 2022-23, provided weather normalises and the outbreak of pink bollworm is adequately contained.
At a global level, Fitch revised up its 2021 average cotton price forecast to USc90.0/lb (USc87.0/lb previously).
Putting global supply and demand forecasts together, Fitch estimates the deficit to be 4.4 million 480 lb bales this year compared to a previous estimate of 1.8 million bales. This will put downward pressure on global stocks and provide some support to the price.
In the longer term, said Fitch, Bangladesh and Vietnam will gain significant market share in cotton consumption as their textile sector expand significantly.
The rating agency said, “India, Indonesia and Pakistan are likely to benefit from the shift in low-value manufacturing away from China, which would boost their share in global apparel exports.”
However, a lack of preferential trade access to the US and EU markets as well as higher labour costs will hit the pace of expansion. China’s demand will continue to trend lower as authorities look to reduce apparel manufacturing operations and move up the value chain.