Regional Economy: Understand The Low Inventory Status Of Indian Cotton Industry

India is trying to cope with the historically low cotton inventory of 2 million bales. The construction of new factories has driven the consumption to soar. Due to competitive prices, India's cotton exports have surged by 125%.

Inconsistent production data estimates and potential supply shortages loomed, adding to concerns about the stability of the cotton industry against the backdrop of rising global prices.

Record low ending inventory: India is facing a record low ending cotton inventory, that is, 2 million bales (170 kg/bale), which is significantly lower than the 2.89 million bales in the previous year.

Increase in consumption: The increase in cotton consumption is attributed to the construction of new factories. Every year, an additional 1-1.2 million bales of spindles are added, resulting in an annual increase in consumption of 1.2-1.5 million bales.

Export increase: Due to the decline in output and competitive pricing, the export of the current year has surged by 125% year on year, reaching 2.15 million packages by the end of April.

The output estimate was flat: although the ending inventory declined, the output estimate remained unchanged at 30.97 million bales, reflecting the continuous demand and supply situation.

Inconsistent production estimation data: Due to different estimation methods, there are differences in production estimates between the Cotton Production and Consumption Committee (CCPC) and the Cotton Association of India (CAI). CAI estimates based on the market arrival since October.

Export competitiveness: The competitiveness of Indian cotton in the international market is affected by the price rise of the New York Intercontinental Exchange (ICE), which may affect the export volume.

Potential supply shortage: Some textile mills will face a shortage of cotton stocks in September 2023. Due to the record low stocks, people are worried that this situation may be repeated this year.

Crop condition confusion: The confusion of the yield estimation of the previous year is due to farmers' unwillingness to produce after obtaining good returns, resulting in differences in the reported crop scale.

Conclusion: India's cotton industry is facing a critical moment. With the surge in consumption and exports, cotton stocks have reached a new historical low. The differences in production estimates have complicated an already challenging situation, requiring cooperative efforts to ensure stable supply and competitiveness in the global market. In the face of changing market dynamics, proactive measures are essential to reduce risks and maintain industry resilience.