'India's cotton output may fall to 32.3 mn bales in 2012-13'.

India’s cotton output is likely to dip by two million bales to 32.3 million in the 2012-13 marketing year (August-July), as farmers are likely to switch to better-priced alternative crops amid unclear cotton export policy, according to a report by the US Department of Agriculture (USDA).

India, the world’s second-biggest grower, had produced a record 34.25 million bales in the 2011-12 marketing year. One bale contains 170 kg of cotton. “Cotton production is forecast to decrease by two million bales to 32.3 million bales, as the area is expected to drop by 10 per cent," USDA said in its latest report. But, domestic cotton consumption is expected to increase to 26 million bales in 2012-13, from 25.3 million bales in 2011-12.

However, India’s exportable cotton supply would be only six million bales in 2012-13, as against 11.75 million bales this year, given an expected drop in production and higher domestic demand, it noted.

On cotton acreage, the USDA said gauging farmers’ planting intentions at this early stage is difficult. However, several factors suggest the cotton area in 2012-13 will be lower at 10.9 million hectares, as against the record 12.2 million hectares in 2011-12.

USDA, however, said, “If the government increases the minimum support price (MSP) for cotton significantly, planting intentions could shift."

Farmers have a number of planting options, as high prices of peanuts, soybeans, guar and maize could prompt them to shift away from cotton in central, western and northern India, it added.

According to the report, Indian farmers may decide to try crops that are subject to fewer policy-driven market disruptions, as it is not clear whether the government will allow fresh cotton export before the start of the 2012-13 marketing year or if the government will develop a new procedure for regulating exports.

On March 5, India had banned cotton exports briefly for a week. It has decided to permit export registered before the ban period.

On yields, the USDA said there is some concern within the industry that these have stagnated over the past few years, even as productivity has increased from an estimated 300 kg per hectare to 500 kg hectare since the introduction of biotech cotton.

“The increasing prevalence of ‘sucking insects’ such as whitefly, the need for better micronutrient and fertiliser management, the spread of cotton into dry-land areas and seed quality are all cited as factors affecting yields," it said.

Given these ongoing challenges, yields are forecast at the five-year average of 500 kg per hectare, it said, adding that India’s yields continue to be significantly lower than the global average of 740 kg per hectare.

Cotton, a predominantly monsoon (kharif) season crop, is planted from the end of April through September, and harvested from October. India’s two-thirds of cotton is produced in Maharashtra, Madhya Pradesh, Gujarat and Odisha where much of the crop is rainfed.

Source : smartinvestor.in