India: Record Consumption and Strong Exports Lower Historically High Stock Levels

13.10.2021 13:34 "Agro Perspectiva" (Kyiv) — According to the report of the USDA Cotton: World Markets and Trade (January 2020), India’s 2021/22 consumption is forecast at a record 25.5 million bales and exports are projected at the second-highest level in 8 years at 5.8 million. This level of total use is forecast to lower ending stocks to 12.4 million bales, down nearly 4.0 million compared with the record level 2 years prior. A robust recovery from the COVID-19 pandemic and stronger domestic consumption and exports of cotton yarn, fabric, and products are projected to support a significant downfall in stocks.

Stock levels nearly doubled to a record 2 years ago primarily due to the following factors. First, production soared 3.0 million bales while consumption fell over 4.0 million. Second, India’s seed cotton prices fell below the Minimum Support Price (MSP), which drove record state purchases and storage of cotton lint in CY 2020 by the Cotton Corporation of India (CCI). For more information, see the June 2020 publication titled «India: Record 2020/21 Stocks Despite Higher Consumption» here.

Yet, the CCI’s record stock levels quickly fell with record sales in 2020/21. Mills and exporters were eager buyers, with 2020/21 domestic consumption rising 4.0 million bales and exports at their highest in 7 years at 6.2 million.

India’s projected record consumption in 2021/22 is driven by the expected strong gross domestic product (GDP) growth as well as rising textile exports. The International Monetary Fund’s October Update projected India’s GDP growth at 9.5 percent in 2021 and 8.5 in 2022, which is expected to support domestic consumption of cotton textiles and garments. World GDP growth projections of 5.9 percent in 2021 and 4.9 percent in 2022 are expected to support exports of cotton lint, yarn, fabric, garments, and home furnishings.

CCI is not expected to purchase a significant quantity of domestic cotton in 2021/22, due to spot prices exceeding the MSP procurement price (5,762 rupee per 100 kgs of seed cotton). Fewer government purchases and less storage coupled with the second-highest level of total offtake (consumption plus exports) are expected to prevent stocks from ballooning back to historically high levels.

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