India is set to beat China and become the top cotton producer this year. China will be ousted from the number one position for the first time in over 30 years. India will produce 30 million bales of cotton in the season that started August while China will produce 29.5 million bales.

The reduction is largely due to fewer incentives for farmers to plant cotton in China’s eastern provinces. Total area in China is projected to decline 11 per cent while for India, the late monsoon will benefit cotton. Some areas originally expected to be devoted to alternative crops, with an earlier planting window, are now projected to move to cotton.

The relatively low profitability of cotton in China is due to the government’s decision to abolish its temporary purchasing policy to prop up prices. The cotton growing area in Yangtze River basin and Yellow River basin has gone down by about 12.1 per cent and 14.5 per cent. The growing area of cotton in China is expected to continue its declining trend in the next few years. The shrinking growing area will result in a big supply gap in the cotton market.

However, China will remain a big consumer of cotton due to its large population, growing incomes and increasing export demand. This can create a big opportunity for India to step up its cotton and yarn exports to China.