The latest report from the Indian Cotton Association shows that India’s cotton output in 2022/23 is 32.15 million bales (equivalent to 5.4655 million tons, a decrease of 900,000 bales from the previous report). Domestic cotton consumption and export volume have not been adjusted and are still 3,000 bales. 10,000 bales (5.1 million tons), 3 million bales (510,000 tons); USDA’s February report shows that India’s cotton consumption and export volume in 2022/23 were 4.899 million tons and 544,000 tons respectively (down 13.1% from January) million tons, a decrease of nearly 20%). The difference between the two in Indian cotton consumption this year is more than 200,000 tons, while the export volume is not much different (34,000 tons).
Some private processing companies in Gujarat and Maharashtra and Indian cotton exporters generally believe that the possibility of Indian cotton exports reaching 500,000 tons in 2022/23 is relatively low, or between 450,000 and 480,000 tons. Institutions such as USDA and CAI are still somewhat overestimated. The reasons can be roughly summarized as follows:
First, India’s cotton production in 2022/23 may drop to between 31 million and 32 million bales. According to AGM data, as of February 12, the cumulative volume of cotton on the market in India in 2022/23 was approximately 2.2775 million tons, a cumulative decrease of approximately 1.534 million tons (a decrease of 40.25%) compared with the three-year average; although it has been on the market for two weeks since late March The sales volume reached 126,000 tons and 127,600 tons respectively, but this was mainly due to other crops entering the spring sowing preparation period, farmers’ cash flow tightening, and the sale of seed cotton accelerating. The growth in market volume lacked continuity.
Second, the import volume of Australian cotton this year is significantly lower than expected, and its substitution for Indian cotton has weakened. It is understood that although the India-Australia Economic Cooperation and Trade Agreement (ECTA) has officially entered into force at the end of December 2022, due to the high price and high quality of Australian cotton, coupled with the sharp depreciation of the Indian rupee, Australian cotton has encountered difficulties in entering the Indian cotton market without tariffs. Resistance, some Indian cotton mills and traders face the pressure of “strong expectations, weak reality” on foreign cotton imports.
Third, since the fourth quarter of 2022, the operating rate of domestic textile enterprises in India and cotton consumption capacity have continued to rebound, and the cotton resources available for export may be lower than expected. In addition to the transfer of orders caused by the escalation of the US/EU ban on Xinjiang cotton imports, the global economy and textile and clothing consumption rebounded, and the earthquake in Turkey in February affected 70%-80% of production capacity. India has become the biggest beneficiary of the outflow of Turkish orders in the past. Therefore, Domestic cotton demand in India continues to rebound. It is understood that the current operating rate of Indian yarn mills has generally rebounded to 50%-60% (a few large factories and enterprises above designated size have reached more than 70%).
Fourth, Brazilian cotton, Australian cotton, African cotton, etc. take advantage of cost performance to seize the global market share of Indian cotton. According to news from Southeast Asian/South Asian countries such as Vietnam, Bangladesh, and Indonesia, the import proportion of Brazilian cotton and Australian cotton will continue to rise in 2022/23, and the export threat to U.S. cotton and Indian cotton is growing. In January 2023, Vietnam imported 70,000 tons of cotton, a decrease of 30.5% month-on-month and a year-on-year decrease of 45.2%. Brazilian cotton accounted for the highest proportion, and US cotton ranked second.
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