Cotton exports may decline as prices continue to rule high

Cotton exports may decline as prices continue to rule high

23 December 2021, Mumbai:

Shipments during October-November are down 42% at 7 lakh bales y-o-y As Indian cotton prices continue to rule high, the trade fears a decline in exports for the current season to September 2022.

Cotton exports have started on a sluggish note and shipments during October-November, the first two months of the season, are down 42 per cent over the same a year ago.

According to Cotton Association of India (CAI) estimates, exports were seven lakh bales (170 kg each) during the first two months of the season compared with 12 lakh bales in the same period a year ago.

“At these high rates, we will be not able to achieve our export target of 48 lakh bales. We may hardly touch 35-40 lakh bales in exports, which will be 50 per cent less compared to last year’s exports of 78 lakh bales,” Atul S Ganatra, President, CAI, said.

Higher prices

Cotton prices are ruling high across the country and growers are seen holding back their produce, anticipating better prices. This is reflected in the market arrivals, which were down 15 per cent till November end.

On the benchmark Intercontinental Exchange or ICE, March futures contract is traded around 106 cents per pound. At the current price levels, the Indian cotton prices are equivalent to around 120 cents per pound on the ICE, making it expensive for overseas buyers.

Trade sources said there’s not much of buying interest for exports now, in a market where prices are on the higher side even during this peak season. Sources said prices are ruling higher only due to insecurity of low arrival and crop expectations. Unseasonal rains during October-November impacted the harvest, triggering quality concerns.

“Exporters are buying at a very slow pace,” said Ramanuj Das Boob, a sourcing agent for both domestic mills and multinationals in Raichur, Karnataka. At the prevailing prices, exports will definitely be less in the year ahead, he said.

Retaining produce

Ganatra said though arrivals are seen improving in December, farmers are not selling the top-quality cotton and are holding it back. Farmers are bringing to market the cotton harvested in third and fourth picking, while are keeping the first and second pickings at home, expecting higher prices.

Ganatra estimates that farmers across the country are holding around 150 lakh bales of top-quality cotton. The first and second picking of cotton is considered to be the best quality. “It is coming very slowly into the market,” he said.

According to recent estimates for the 2021-22 season, CAI has pegged the crop size at 360.13 lakh bales — higher than the previous year’s 353 lakh bales. The trade body expects the domestic demand to stay flat at last year’s levels of 335 lakh bales.

“While there’s unlikely to be any major change in the crop size, the marketing season may prolong till August-September as farmers may continue to hold on to their produce,” Ganatra said.

Business Line (The news article has not been edited by DFU Publications staff)

 

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