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Rising domestic prices curb cotton exports

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M.R. Subramani

Chennai, Jan 17

COTTON exports have begun to slow down as domestic prices have almost caught up with offers from buyers abroad.

"Domestic prices are just Rs 2,000 a candy less than the rates offered for export. Taking into account the charges for transportation and other things related to shipping, there isn't much gain in exports," industry sources said.

Exporters who had shipped cotton at least until a couple of weeks back have gained significantly.

According to sources, export offers are quoted at 58.5-60 cents a pound (Rs 20,350-20,880 for a candy of 355.56 kg). Most of the demand from buyers abroad is for the medium staple variety, Shankar-6. On Tuesday, Shankar-6 was quoted at Rs 18,600 a candy in the domestic market.

So far, 18 lakh bales (of 170 kg) have been exported and the industry is of the view that 25 lakh bales could be exported this season (October 2005-September 2006).

"Most of the exports have been to China with very little quantity to Pakistan and a meagre volume to Bangladesh. Indonesia and Thailand have bought some quantities," the sources said.

China increased cotton imports by 35 per cent in 2005 to meet increasing demand from the textile industry.

The exports have, on the other hand, helped to keep the domestic prices stable despite projections of a good crop for the second consecutive year.

The Cotton Advisory Board, comprising representatives from growers, trade, industry, and the Centre, has estimated production this season at 242.5 lakh bales, the same as last season. Initially, it was projected to be 255 lakh bales.

The sources also said that the current cold spell had not affected cotton production in any part of the country.

When contacted, Mr D.K. Nair, Secretary-General, Confederation of Indian Textiles Industry, said: "As of now, there has been no report of any damage to cotton crop either in North India or any other part."

He added that cotton arrival in the North had tapered off, while in the central parts it was in full swing. "The crop has begun to arrive in the market in the South."

Prices for cotton are rising in all segments but the increase was substantial in the extra long staple (ELS) varieties. "Prices for the ELS varieties such as Suvin, DCH-32, and MCU-5 are ruling higher due to demand-supply gap," he said.

While demand for ELS varieties has been estimated at eight lakh bales, the supply is projected at five lakh bales. "The gap has to be made up through exports."

Prices for DCH-32 have increased to Rs 43,000-45,000 a candy from Rs 34,000 last month. MCU-5, on the other hand, is quoted at Rs 22,500, up Rs 1,000.

Asked if cancellation of contracts of ELS cotton imports by Egypt had led to the price hike, Mr Nair replied in the negative. "If we don't get it from Egypt, we can get it from Australia or Sudan or even the CIS nations."

Though the industry is of the view that domestic prices are ruling high despite comfortable stock situation, sources agree that they are reflecting the global trend.

"We have to accept the fact that we are able to export our surplus while importing our requirement," said Mr Nair.

(This article was published in the Business Line print edition dated January 18, 2006)
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