Indian cotton prices rise amidst supply crunch and global demand

Cotton prices have seen a marginal increase of 0.04 per cent due to a surge in demand for cotton yarn in South India. This uptick is driven by robust export activity and increased orders from the domestic apparel industry.

However, the cotton market faces significant supply-side challenges. Reduced planting area and crop damage caused by heavy rainfall are expected to lead to a 7.4 per cent decline in India's cotton production for the 2024-2025 season. The USDA has also lowered its India output forecast to 30.72 million bales. This production shortfall is likely to result in lower exports and increased imports, which could rise from 1.75 million bales to 2.5 million bales compared to the previous year.

While global cotton production projections have been revised upward due to stronger output in China, Brazil, and Argentina, the reduced Indian production could still bolster global cotton prices. However, the market is experiencing some downward pressure from Hurricane Helene's impact on US production and a decline in global import demand.

India's cotton acreage has been steadily declining by 9 per cent annually, particularly in Gujarat, as farmers opt for more profitable crops like groundnuts. Despite the supply deficit, India's domestic cotton demand is projected to remain stable at 31.3 million bales in 2024-2025.