As Global Prices Fall, Cotton Imports Rise

India’s cotton imports this season, which ends this month, will be at 12-year high as global prices have dropped below domestic rates.

“With prices on ICE US dropping below 90 cents a pound since May, spinning mills in the South signed contracts to buy cotton from sellers abroad. Most of the imports have been made after May,” said J Thulasidharan, President, Indian Cotton Federation.

Currently, cotton contracts for delivery in December are ruling at 65.75 cents a pound (approximately ?31,500 for a candy of 356 kg). In the domestic market, Shankar-6, mainly in demand for exports, is ruling at ?39,000-40,000 a candy.

Some 12 lakh bales have been imported since May and if the usual imports of five lakh bales are taken into account, then shipments into the country will exceed 17 lakh bales. (Extra-long staple cotton is imported normally since the availability of such varieties is not ample.) The last time when imports exceed 17 lakh bales was during 2002-03.

“Mills in South imported mainly. It makes sense to import since cotton is cheaper to import than buying from Gujarat due to higher transport costs,” said Thulasidharan.

Most of the imports were contracted around 85 cents.“Import contracts have been signed between 85 and 92 cents c&f by spinning mills in South India. For shipments till December, contracts have been signed at 75-78 cents. Imports will continue next season starting October since mills have committed themselves to getting the shipments,” said Anand Poppat of Saurashtra Ginners Association.

The imports will be mainly from Australia and Africa.

Conceding that there was supply hurdles, especially due to quality issues, Poppat said currently 10,000 bales (170 kg each) of cotton are arriving every day in Gujarat markets.

“Farmers in Gujarat had held back their produce. Stocks with them now could easily be five lakh bales,” said Poppat.

Delayed new crop

Importing cotton up to the year-end is crucial for mills since the arrival of new crop will be delayed this year.“Currently, the crop is in the third stage of development, getting its last round of rain. Arrivals are likely to be delayed by 30-40 days and may not peak until the second fortnight of November,” said Poppat.“Imports could slow down once arrivals peak,” said Thulasidharan.“Prices could drop to levels of ?36,000 when the new crop begins to arrive,” said Poppat.

Prices under pressure

Cotton prices are seen under pressure since domestic production next season is seen at a new high of over 375 lakh bales by the Cotton Advisory Board. Data from the Agriculture Ministry showed that the area under cotton has increased to a record 122.50 lakh hectares this year against 115.5 lakh hectares last year.

“Production can easily top 400 lakh bales with production in Gujarat likely to be over 135 lakh bales,” said Poppat.

Once domestic prices drop to levels of ?36,000, then Indian cotton could turn competitive in the global market.

“Prospects for exports are good, though they may not match this season’s level,” said Poppat.

About 90 lakh bales are projected to have been exported this season against 101.43 lakh bales last season.

“China has ended auctioning its stocks. Auctions will not take place till March since it will buy the fibre from farmers. So, it will import cotton,” said Poppat.

With Australia’s crop seen falling 50 per cent this year to 117 lakh bales (170 kg) and the area under the fibre in China down nine per cent, India and the US, which is likely to harvest a record crop, will remain the main sources for cotton this year.

Source : thehindubusinessline.com