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After an early and aggressive start to picking this season's cotton crop, arrivals across India continue to lag as producers withhold supplies, helping drive the market higher.  Nationwide arrivals through January 26th stand at 15.1 million bale equivalents (170-kg), 16.9% less versus this point last year.  This is a pronounced reversal of trend from the double-digit advance in arrivals noted in mid-November.  The shortage is broad-based across much of the country.

While arrivals in Gujarat (up 7.6%) and Madhya Pradesh (4.5%) are bigger versus this point last year, volumes in all other key cotton-growing states are lower from a year ago.  In fact, this deficit in nationwide arrivals has grown over the last month and may be difficult to reverse in the remaining months of the ginning season, foreshadowing a harvest size somewhat smaller than last year.

In fact, season-to-date arrivals are comparable to this point in the 2011/12 crop year, hinting this season's final level of production may be comparable to that year's crop.  Once picking and ginning began in September the volume of season-to-date arrivals reported since then have risen in close step with volumes noted at the same point on the calendar in 2011/12.  If this trajectory continues, arrivals may finish this season comparable to the 33.5 million bales in arrivals witnessed in 2011/12.

After the robust start to the season, the slower pace of arrivals witnessed in recent weeks is adding supply-side pressure to boost local cotton futures.

Sources indicate farmers are focused on harvesting rice and are holding picked cotton in hopes of earning higher prices.  Indeed, since reaching a near-term low in early December cotton futures on India's Multi Commodity Exchange have climbed over 2,000 rupees per 170-kg. bale and are trading at their highest since October.  We suspect once these delayed arrivals reach gin yards in coming weeks, season-to-date arrivals may stretch beyond the 2011/12 volume and finish as one of the biggest--if not latest--cotton crops on record for the country.