Challenges that the cotton industry in India are going to face this year

Winter is coming! The cycle of seasons not only divides the world into different weather zones, but it also plays a decisive factor in the activities of the agricultural community in India. Hence, with the onset of winter, the time to sow the Rabi crops is coming near. This also means that in the coming months, farmers who grow Kharif will gear up for harvesting. 

Cotton, one of the major Kharif crops produced by India, captures global attention around this time of the year. This year, however, is special. According to the recent report released by the United States Department of Agriculture (USDA), India’s cotton crop production is estimated to touch 305 lakh US bales (each bale equals 217.7 kg).

This roughly comes up to 390 lakh India bales (each India bale comes up to 170 kg). With a production quantity that high, India will retain its position of the number 1 cotton cultivator in the world. This year, the area dedicated to cotton plantation has been the largest with 128 lakh hectares of land sown with cotton seeds.

States like Maharashtra, Rajasthan and Telangana have reported higher acreage than ever. An extended spell of monsoon has played a significant role in the increased bulk of production.  

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While cotton cultivators might be counting their blessings, cotton traders are far from a state of happiness. Speculations are rife that the extended bout of monsoon in the month of October might have affected the quality and the size of the cotton crop. 

What does this mean for the cotton crop that is being produced for export?

This means that the price of the cotton produced in this season will be up for negotiation in case the quality and the size of the crop is significantly affected. A compromise in the quality will lead to a compromise in the price in the international market.

For the last couple of years, cotton cultivators have been trying to buck up the global slump in the price of cotton due to the ongoing trade war between the US and China. However, with a possible decline in the quality of cotton produced in India this year, it might be difficult to overcome the slump that’s underway. 

Is there a way out?

Well, the good news is that there is! India will need to look to broaden the arena of export and increase the amount of cotton that is supposed to be exported. This simply means that traders will need to compensate for the possible decline in quality with an increase in the quantity that is being exported. Thankfully, the amount of cotton produced this year is at an all-time high. Hence, traders should advantage of that and aim to earn higher at global markets.

For any clarifications/feedback on the topic, please contact the writer at shilpi.guha@cleartax.in