According to the estimate of Cotton Corporation of India (CCI), cotton production is likely to increase 13.6% to 35.5 million bales (170kg) for the October 2019-to-September 2020 season
High cotton production due to more-than-average rainfall in the country and increased sowing by farmers may closely impact prices. According to the estimate of Cotton Corporation of India (CCI), cotton production is likely to increase 13.6% to 35.5 million bales (170kg) for the October 2019-to-September 2020 season. Area under cotton cultivation has increased by 6 per cent y-o-y during the current season, said India Ratings and Research (Ind-Ra) in its latest report.
It is also to be noted that India’s raw cotton exports fell by 75% during 1HFY20 owing to high domestic prices and the availability of cheaper cotton from Brazil, the US and Vietnam, hence, the prices will take a hit, the Ind-Ra report mentioned.
The report also highlighted the trends in the sub-segments of the textile sector, including cotton, man-made fibres, yarns, fabric with a focus on commodity prices, imports/exports, production and recent rating actions.
Reduction in cotton prices
Cotton prices witnessed a moderate reduction in September 2019, with the Cotton Corporation of India (CCI) buying at the Minimum Support Price (MSP) in Punjab, Haryana, Gujarat and Rajasthan. CCI has purchased approximately 1.2 million bales (around 1 per cent) of the total arrival in the ongoing cotton season (October 2019-September 2020). The cotton crop in Maharashtra is estimated to be delayed, as unseasonal rains damaged around 1.9 million bales in the state. The damaged crop is estimated to fetch prices that would be 30-35 per cent lower than the MSP (Minimum Support Price) due to high moisture content.
The spinning industry saw disruptions in production in 2QFY20 owing to reduced demand and volatility in cotton prices. While demand from China demand improved marginally in August and September 2019, a further improvement would be healthier for the spinning industry, which has been facing margin pressure and low capacity utilisations.
Manmade fibres (MMF) saw the second consecutive month of stabilisation on the back of stable crude prices; however, the short-term instability in prices in September 2019, following the attack on the refinery of Aramco, Saudi Arabia, led to temporary pressure on the margins of synthetic fibres. With the recovery of the attacked oil sites, crude prices returned to stable levels, with a corresponding impact on MMF prices.
Rise in fabric export
Fabric exports improved in 1HFY20 owing to an improvement in the quality of Indian fabrics and addition of newer markets. During 1HFY20, exports amounted to INR124.89 billion (1HFY19: INR116.11 billion), with the main markets being Bangladesh (19 per cent), Afghanistan (7.4 per cent) and Sri Lanka (6.2 per cent).
A sharp rise in imports of cheap apparel from Bangladesh has rendered the Indian textile value chain uncompetitive. Readymade garments recorded de-growth of 14 per cent mom in September 2019 due to a steep fall in demand from the US and UK.
