India is expected to purchase a record volume of cotton from farmers in the upcoming season, as domestic prices face pressure from cheaper imports and weakening demand following hefty U.S. tariffs on textile exports, industry officials told Reuters.
Cotton consumption in the world's second-largest producer has slowed, with exporters reporting a sharp decline in orders from the United States, which accounts for nearly 29% of India's $38 billion in annual textile exports.
"Demand has slowed down, and that's hurting the industry. In this kind of market, farmers are unlikely to get the promised support price for their cotton," Atul Ganatra, president of the Cotton Association of India, told Reuters.
The government will have to step in and buy a record amount of cotton — maybe around 14 million bales, Ganatra said.
India has raised the price at which it will buy new-season cotton from domestic farmers by 7.8% to 8,110 rupees per 100 kg, but local market prices are hovering around 7,000 rupees.
Prices are expected to come under pressure from next month due to rising supplies from the new season's crop and the arrival of cheaper imported cotton, said Pradeep Jain, a ginner based in Jalgaon in the western state of Maharashtra.
Last week, India extended an import duty exemption on cotton by three months, until the end of December.
Farmers usually sell their crop to the state-run Cotton Corporation of India (CCI) whenever prices fall below the government-set floor price.
In the 2024/25 marketing year, which ends this month, CCI spent a record 374.36 billion rupees to buy 10 million bales from farmers.
"There is no limit or target for buying cotton from farmers in the new season. We will buy the entire quantity that farmers bring to CCI," Lalit Kumar Gupta, managing director of CCI told Reuters.
The CCI is planning to increase the number of procurement centres by 10% to 550 in the new season and has the capacity to purchase more than 20 million bales, Gupta said.
In December quarter, India could import more than 2 million bales, said a New Delhi-based dealer with a global trade house.
"Imported cotton is not only cheaper but also better in quality. So, textile mills will be busy using it even when local supply is at its peak, which will push down domestic prices,” the dealer said.
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