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M.R. Subramani

Chennai , Oct. 19

AT least five lakh bales (of 170 kg) of cotton have been contracted for exports to Asian countries even as the new cotton season has got under way.

"Countries such as China, Taiwan and Bangladesh have bought Indian cotton, which now enjoys a price advantage over US cotton," industry sources said.

One of the major reasons for these Asian nations, including Indonesia, to turn towards Indian cotton has been the improvement in quality besides the advantage of freight rates.

"Our cotton quality has improved as farmers have begun to use better quality seeds," the sources said.

Export prospects look good with a long-term opportunity to export about 25 lakh bales this season (October 2005-September 2006).

Primarily, Shankar-6 grown in Gujarat is in demand abroad, while limited quantities of J-34 that is grown in Punjab have been contracted. Some transactions have been done around 51-52 cents a pound c.i.f (Rs 19,000 for a candy of 355.62 kg).

In comparison, a similar type of cotton from the costs 56-57 cents a pound c.i.f. "In view of the demand for export, domestic prices have begun to look up. As a result, exporters are now quoting 54 cents," the sources said.

In the domestic market, cotton prices, which declined, leading to protests by farmers, especially in North India, have begun to rise. Earlier this month, a hue and cry was raised in the political circles over falling cotton prices, and the National Agricultural Co-operative Marketing Federation said it would buy cotton at the minimum support price (MSP) fixed by the Centre.

The MSP fixed for raw cotton for varieties such as J-34 is Rs 1,760 a quintal, while for others such as H-4 and S-6 it is Rs 1,980.

Since September 1, lint prices for Shankar-6 have increased to Rs 17,400 for a candy from Rs 16,600. While for J-34, the rates have dipped to Rs 14,813 from Rs 15,242 during the period.

"The exports have not had much effect on the domestic prices. Whatever effect it may have had, it is minimum," the sources said.

Prices in the domestic market are unlikely to react to export enquiries in view of a huge carryover stock and projections of a record crop.

The Cotton Advisory Board (CAB), a body that comprises growers, trade, industry and Government officials, has estimated this season's output at 255 lakh bales against 243 lakh bales last season.

China is looking to buy cotton from other sources as its production is projected to be down to 5.4-5.5 million tonnes (mt) from 6.32 mt last year. Though area under cotton in China has gone up this year, two typhoons between July and September have hit production.

China primarily buys from the US, whose production this year is seen lower at 227.17 lakh bales of 217.7 kg (nearly 5 mt) against 232.51 lakh bales (about 5.5 mt) last year. The crop in the US, too, has been affected by adverse weather conditions.

The exports also come at a time when the carryover stock is estimated to be 72 lakh bales.

However, the export prospects are unlikely to have any impact on imports. "Imports of finer varieties from Sudan and Egypt will continue. It could be around six lakh bales," the sources said.

Last year, despite a record crop, imports totalled 12 lakh bales as per CAB estimates. This is against imports of six lakh bales the previous year.

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