Voluntary Report - public distribution

**Date:** 7/30/2004

**GAIN Report Number:** IN4079

IN4079

**India**

**Cotton and Products**

**August Update**

**2004**

**Approved by:**

![](media/image1.wmf)Chad R. Russell

U.S. Embassy, New Delhi

**Prepared by:**

Santosh Kr. Singh

**Report Highlights:**

Post's estimate for India's 2004/05 cotton production is lower at 15.2
million bales (170 kg) from 8.2 million hectares due to the lack of
monsoon rains in July. Imports are expected to rise to 2.0 million bales
on tight domestic supplies.

Includes PSD Changes: Yes

Includes Trade Matrix: No

Unscheduled Report

New Delhi \[IN1\]

\[IN\]

**Table of Contents**

[**Section I: Situation and Outlook
3**](#section-i-situation-and-outlook)

[New Crop Prospects Adversely Affected As Monsoon Fails
3](#new-crop-prospects-adversely-affected-as-monsoon-fails)

[Cotton Prices Rise 4](#cotton-prices-rise)

[2004/05 Import Prospects Improve 4](#import-prospects-improve)

[2003/04 Production Revised Up, Area Down
4](#production-revised-up-area-down)

[Section II: Statistical Tables 5](#section-ii-statistical-tables)

[Table 1: Commodity, Cotton (Metric Tons), PSD
5](#table-1-commodity-cotton-metric-tons-psd)

[Table 2: Commodity, Cotton (480 lb bales), PSD
6](#table-2-commodity-cotton-480-lb-bales-psd)

[Table 3: Area, Production & Yield of Cotton in Major States
7](#table-3-area-production-yield-of-cotton-in-major-states)

[Table 4: Month End Prices of Popular Varieties
8](#table-4-month-end-prices-of-popular-varieties)

#  

# Section I: Situation and Outlook

Note: All figures in the text are in 170 kg bales unless otherwise
stated.

## New Crop Prospects Adversely Affected As Monsoon Fails

The weak monsoon in July has led to a drought-like situation in many
cotton growing areas, and has adversely affected the 2004/05 cotton
crop. Production is expected to decline to 15.2 million bales (includes
1.1 million bale of loose cotton), and cotton area is estimated lower at
8.2 million hectares.

After early arrival of the southwest monsoon, which brought good rains
in the month of June, further monsoon activity faltered in July.
Rainfall has been particularly scanty in the central (Gujarat,
Maharashtra, and Madhya Pradesh) and northern (Punjab, Haryana, and
Rajasthan) states and in parts of Andhra Pradesh (see IN4075). Planting
in the rainfed cotton growing areas of central India has been delayed by
2-3 weeks due to scanty rains during most of July. The monsoon has been
satisfactory in the southern states of Karnataka, Tamil Nadu, and most
of Andhra Pradesh, where planting has been progressing well under
adequate moisture availability. The standing crop in central and north
India urgently requires more rains, and any revival of monsoon activity
before the second week of August will support crop prospects. Although a
clearer picture of the impact of impending monsoon failure on MY 2004/05
cotton production will emerge only by the end of August, Post estimates
production to decline to 15.2 million bales, down 12 percent from last
year (see table-3 for breakout by states).

[Central Region (Gujarat/Maharashtra/Madhya Pradesh)]{.underline}

Planting in the largely rainfed cotton belt of central India started on
an optimistic note with the onset of early monsoon showers in mid-June,
but since has progressed in spurts following the occasional monsoon
showers. Sources report that planting has almost stalled since the
second week of July. Dry conditions have also affected seed germination
and the establishment of seedlings in some pockets. There is an
immediate need for additional rains in the next two weeks to aid
additional planting and the healthy growth of the standing crop. A
continuing dry spell may force the farmers to shift to shorter duration
crops like small millets, castor, and forage crops. Although planting of
some late season varieties may continue until the end of August, the
cotton area in central region is estimated lower at 4.8 million
hectares.

[Northern Region (Punjab/Haryana/Rajasthan)]{.underline}

Cotton planting in the largely irrigated northern region occurred on
schedule (early June). The provisional planting estimates from the state
agriculture departments indicate a 15 percent increase in cotton area
over last year. The pre-monsoon showers in June augmented irrigation
supplies, and crop germination and growth conditions were ideal.
Although the crop in most of the region is facing moisture stress due to
insufficient rains in July, there is no crop loss. The problem is
particularly bad in Haryana and Rajasthan, where the farmers have been
unable to irrigate the crop due to the lack of both canal water and
power supplies for ground water pumping. Although evidence of pests
(heliothis, white flies, bollworms) exists, there are no reports of any
damage, as the dry weather conditions have been unfavorable for the
pests. September weather will be crucial in determining the crop's yield
and quality, as rains and overcast conditions can foster the spread of
heliothis and boll worms, which can affect early pickings.

[Southern Region (Andhra Pradesh/Karnataka/Tamil Nadu)]{.underline}

Cotton planting has been progressing quite well in the southern region
with adequate moisture availability except for some pockets in Andhra
Pradesh. Market sources report that almost 70 percent of the planting is
over, and that the cotton area may increase by 18 percent over last
year's level. However, some parts of Andhra Pradesh need more rains to
support additional planting and crop growth.

## Cotton Prices Rise

With the likelihood of drought threatening the upcoming Indian cotton
crop, domestic prices for most varieties (see table 4) have started
rising during July, and are expected to firm up further during August.
Prices are expected to remain strong during most of MY 2004/05 due to an
expected short crop, but international cotton prices will guide the
movement of domestic prices.

## 2004/05 Import Prospects Improve

MY 2004/05 imports are expected higher at 2.0 million bales, and exports
are expected lower at 100,000 bales on expected tight domestic supplies.
The drought will not only affect crop size, but also the quality of
cotton during the upcoming season. Consequently, many local mills
(specially export oriented units) will have to augment their quality
cotton requirement with imports.

Market sources report a buying spurt by the local mills over the past
3-4 weeks, with about 200,000 bales of cotton contracted for imports for
delivery through October. While most mills may prefer to wait another
2-3 weeks before they reassess their supply situation, some mills have
started covering cotton for October, on account of expected late
domestic arrivals. Although the volume of overall imports during MY
2004/05 will depend on the relative prices of local cotton vis-à-vis
international cotton, expected higher domestic prices of local cotton
and the lack of availability of quality domestic cotton is expected to
push imports to 2.0 million bales.

## 2003/04 Production Revised Up, Area Down

MY 2003/04 production is revised higher to 17.2 million bales (including
1.1 million bales of loose cotton), based on the latest estimates of
market arrivals to date. Area is lowered marginally to 7.9 million
bales, based on the provisional estimates provided by the Ministry of
Agriculture. These estimates are subject to further revisions.

Market arrivals through July 17, 2004, reached 16.98 million bales,
compared to 13.50 million bales for the corresponding period last year.
Arrivals by state (in million bales) with previous year figures in
parentheses, are: Punjab 1.03 (0.8); Haryana 1.09 (0.85); Rajasthan 0.75
(0.45); Gujarat 4.97 (3.05); Maharashtra 3.07 (2.40); Madhya Pradesh
1.60 (1.80); Andhra Pradesh 2.60 (2.00); Karnataka 0.37 (0.55); Tamil
Nadu 0.30 (0.35); Others 0.10 (0.10); and loose cotton 1.10 (1.15). The
continued arrivals of summer cotton from the South and some additional
arrivals in the North and Maharashtra should take 2003/04 production to
17.2 million bales.

# Section II: Statistical Tables

## Table 1: Commodity, Cotton (Metric Tons), PSD 

  ------------------ ------------- ------------- ------------- ------------- ------------- ------------- --------------
  **PSD Table**                                                                                           

  **Country:**       **India**                                                                            

  **Commodity:**     **Cotton**    (HECTARES)                                                             
                                   (METRIC TONS)                                                         

                                   **2002**                    **2003**                    **2004**      UOM

                     Old           New           Old           New           Old           New            

  **Market Year                    **Aug-02**                  **Aug-03**                  **Aug-04**    (MONTH/YEAR)
  Begin**                                                                                                

  Area Planted       7600000       7572000       8000000       7900000       8500000       8200000       (HECTARES)

  Area Harvested     7600000       7572000       8000000       7900000       8500000       8200000       (HECTARES)

  Beginning Stocks   1116066       1116066       782074        782073        836505        886514        METRIC TONS

  Production         2307901       2307901       2873991       2924000       2721582       2584000       METRIC TONS

  Imports            264755        264755        195954        195954        261272        340000        METRIC TONS

  **TOTAL SUPPLY**   **3688722**   **3688722**   **3852019**   **3902027**   **3819359**   **3810514**   METRIC TONS

  Exports            10886         10886         119750        119750        21773         17000         METRIC TONS

  USE Dom.           2664070       2664070       2663050       2663050       2728181       2728181       METRIC TONS
  Consumption                                                                                            

  Loss Dom.          231692        231693        232713        232713        232900        232900        METRIC TONS
  Consumption                                                                                            

  TOTAL Dom.         2895762       2895763       2895763       2895763       2961081       2961081       METRIC TONS
  Consumption                                                                                            

  Ending Stocks      782074        782073        836505        886514        836505        832433        METRIC TONS

  **TOTAL            **3688722**   **3688722**   **3852018**   **3902027**   **3819359**   **3810514**   METRIC TONS
  DISTRIBUTION**                                                                                         
  ------------------ ------------- ------------- ------------- ------------- ------------- ------------- --------------

Note: Production figures for MY 2002, 2003 and 2004 include 1.15 million
bales (170 kg), 1.1 million bales and 1.1 million bales of loose cotton
respectively.

## Table 2: Commodity, Cotton (480 lb bales), PSD 

  ------------------ ------------ ----------- ----------- ----------- ------------ ----------- --------------
  **PSD Table**                                                                                 

  **Country:**       India                                            Conversion   0.00459      

  **Commodity:**     **Cotton**                                                                 

                                  **2002**                **2003**                 **2004**    UOM

                     Old          New         Old         New         Old          New          

  **Market Year                   08/2001                 08/2002                  08/2003     (MONTH/YEAR)
  Begin**                                                                                      

  Area Planted       7600000      7572000     8000000     7900000     8500000      8200000     (HECTARES)

  Area Harvested     7600000      7572000     8000000     7900000     8500000      8200000     (HECTARES)

  Beginning Stocks   5126         5126        3592        3592        3842         4072        1,000 480lb
                                                                                               bales

  Production         10600        10600       13200       13430       12500        11868       1,000 480lb
                                                                                               bales

  Imports            1216         1216        900         900         1200         1562        1,000 480lb
                                                                                               bales

  **TOTAL SUPPLY**   **16942**    **16942**   **17692**   **17922**   **17542**    **17501**   1,000 480lb
                                                                                               bales

  Exports            50           50          550         550         100          78          1,000 480lb
                                                                                               bales

  USE Dom.           12236        12236       12231       12231       12530        12530       1,000 480lb
  Consumption                                                                                  bales

  Loss Dom.          1064         1064        1069        1069        1070         1070        1,000 480lb
  Consumption                                                                                  bales

  TOTAL Dom.         13300        13300       13300       13300       13600        13600       1,000 480lb
  Consumption                                                                                  bales

  Ending Stocks      3592         3592        3842        4072        3842         3823        1,000 480lb
                                                                                               bales

  **TOTAL            **16942**    **16942**   **17692**   **17922**   **17542**    **17501**   1,000 480lb
  DISTRIBUTION**                                                                               bales
  ------------------ ------------ ----------- ----------- ----------- ------------ ----------- --------------

Note: Production figures for MY 2002, 2003 and 2004 include 1.15 million
bales (170 kg), 1.1 million bales and 1.1 million bales of loose cotton
respectively.

## Table 3: Area, Production & Yield of Cotton in Major States

(Area 000 ha; Production 000 bales of 170 kgs, Yield Kgs/ha)

  ------------- ------------ --------- --------- ----------- --------- --------- ------------- --------- ---------
                                                                       Final     Provisional   Revised   Revised

  STATE                      1997/98   1998/99   1999/2000   2000/01   2001/02   2002/03       2003/04   2004/05

  Maharashtra   Area         3139      3199      3254        3077      2980      2799          2765      2600

                Production   2150      2650      3650        2050      3425      2400          3100      2200

                Yield        116       141       191         113       195       146           191       144

  Gujarat       Area         1519      1607      1516        1615      1687      1498          1650      1600

                Production   4200      4750      2850        2400      3250      3050          5000      3500

                Yield        470       502       320         253       328       346           515       372

  Madhya        Area         517       501       525         506       623       550           575       600
  Pradesh                                                                                                

                Production   2250      1875      1550        1750      2000      1800          1600      1600

                Yield        740       636       502         588       546       556           473       453

  Punjab        Area         727       562       475         474       600       425           450       550

                Production   725       500       800         900       925       800           1050      1150

                Yield        170       151       286         323       262       320           397       355

  Haryana       Area         638       582       546         555       610       535           510       610

                Production   900       700       1050        1000      550       850           1100      1200

                Yield        240       204       327         306       153       270           367       334

  Rajasthan     Area         645       645       583         510       347       335           440       450

                Production   1100      1150      1300        1050      700       450           750       600

                Yield        290       303       379         350       343       228           290       227

  Andhra        Area         898       1278      1040        1022      1002      900           780       900
  Pradesh                                                                                                

                Production   2550      2500      2200        2500      2675      2000          2600      2500

                Yield        483       333       360         416       454       378           567       472

  Karnataka     Area         518       608       600         560       591       362           495       600

                Production   750       875       800         800       700       600           400       750

                Yield        246       245       227         243       201       282           137       213

  Tamil Nadu    Area         247       243       185         193       200       115           180       220

                Production   500       550       550         550       500       400           400       500

                Yield        344       385       505         484       425       591           378       386

  Others        Area         56        62        67          64        90        53            55        70

                Production   100       125       150         100       75        100           100       100

                Yield        304       343       381         266       142       321           309       243

  All-India     Area         8904      9287      8791        8576      8730      7572          7900      8200

                Production   15225     15675     14900       13100     14800     12450         16100     14100

                Yield        291       287       288         260       288       280           346       292
  ------------- ------------ --------- --------- ----------- --------- --------- ------------- --------- ---------

Note: Production figures for 1997/98 --2004/05 in the PS&D includes
loose cotton estimates.

## Table 4: Month End Prices of Popular Varieties

(Rupees per Metric Tons)

  ---------- ---------- ---------- ---------- ----------- ---------- ----------
  Year       Bengal     S.G.J.     H-4        Shankar-6   MCU-5      DCH-32

             Deshi      F-34       M.P.       Gujarat     A.P.       South

  2002/03                                                            

  Aug        39930      41060      49210      51740       61580      81830

  Sept       38520      40490      47800      50050       59610      77330

  Oct        41620      43330      48930      50620       63270      78740

  Nov        41060      46680      49770      52020       63270      80980

  Dec        36840      46400      49490      52870       64680      83800

  Jan        34590      46400      50620      53990       64680      82950

  Feb        38810      52300      56240      59050       65520      88280

  Mar        38240      55680      58210      61860       67490      87720

  Apr        41620      59050      61020      63560       68330      87160

  May        40490      58210      59050      61860       69740      88000

  Jun        40770      59050      60740      63000       70300      88560

  Jul        41060      61020      62710      63560       71710      91360

  Avg Price  39463      50806      54483      57015       65848      84726

  2003/04                                                             

  Aug        39090      60460      61580      63540       68900      87560

  Sept       37970      59060      63820      65520       70300      87180

  Oct        39090      60460      61580      63540       68900      87560

  Nov        37110      55960      58220      61320       65540      87990

  Dec        39630      57920      61300      63840       66100      85750

  Jan        42740      62420      64940      67480       71410      91390

  Feb        43860      59050      62980      66080       70290      88590

  Mar        44420      59900      62140      66640       70290      85790

  Apr        43590      59900      62140      65800       71700      85790

  May        44430      61580      62710      67490       71700      85790

  Jun        45560      59060      62150      65800       71710      85790

  Jul        48370      60740      62710      66370       71710      85790

  Avg Price  42155      59709      62189      65285       69879      87081
  ---------- ---------- ---------- ---------- ----------- ---------- ----------

Source: East India Cotton Association, Mumbai.