August 13, 2002

2002/03 Cotton Area And Production for India Expected

to Drop on Domestic Cotton Prices and Monsoon Performance

The Indian cotton area for the 2002/03 season depends on several factors, with domestic cotton price playing the most crucial role with in-country competing crops prices such as corn and rice affecting area to a lesser extend.  Domestic and financial conditions also influence cotton area along with government policies and weather. Low farm producer prices for the October to March 2001/02 period have shaped farmer planting decision resulting in a drop in planted area for 2002/03.  A very strong direct relationship exists between cotton area and the farm producer prices for the previous six months prior to planting in April in the Northern cotton zone and extends southern as planting continues (See Graph).  The price line on the graph shows an average for each six month period beginning in 1991/92. During the first six months (October 2001 to March 2002) of the current marketing year, the price averaged 15 percent below the same period a year earlier.  This factor alone suggests that India's cotton area in 2002/03 will be lower than the 2001/02 area.  However, area shifts also depend upon the price level of other crops in relation to the price of cotton and expected profit margins in comparison to these other crops. With these factors affecting area, indications are that cotton area in 2002/03 should be roughly around 8.1 million hectares, compared with an estimated 8.7 million for 2001/02.  The area drop was expected from a survey of economic factors, but as this season monsoon in the Northern cotton zone fall below last year's performance area drop to 7.9 million hectares as planting operations stalled in the central cotton zone.  Yields are expected to drop below the five-year average of 301 kilograms per hectare to 291 kilograms, reducing production for  2002/03 to an estimated at  10.5 million bales.  This is the lowest crop since 1993/94 when production was 9.8 million bales.

June's monsoon rainfall was initially promising, however the monsoon weakened significantly in July. The northern cotton zone (Punjab, Haryana and Rajasthan) continues to experience extremely dry conditions. Given the current atmospheric conditions as of August 7, the probability remains very low that the northern states will receive any additional rainfall of significance. In central zone states (Gujarat, Madhya Pradesh and Maharashtra) monsoon rainfall amounts were adequate for planting to progress slowly. Planting delays occurred in the southern states (Andhra Pradesh, Karnataka and Tamil Nadu), the result of very low rainfall during the month of July.

For more information, contact Jim Crutchfield or Ron Roberson
with the Production Estimates and Crop Assessment Division, at (202) 720-0888 or Santosh Singh in India