Cotton exporters faced with faltering demand

Though the Centre has allowed export of an additional 10 lakh bales of raw cotton, exporters are grappling with slow demand.

“Demand for raw cotton exports is slow as yarn is not moving at all in the global market,” said Mr M.B. Lal, former chairman of the Cotton Corporation of India.

“Global prices are too high that demand for cotton in general is slow,” said Mr Anand Poppat, Vice-President of the Saurashtra Ginners Association.

“Exporters, multi-national companies and ginners-cum-exporters are finding it tough to get buyers,” said Mr A. Ramani, a cotton analyst.

“Exporters have built large inventories. Therefore, the export clearance may not result in a price surge,” said Mr Poppat.

In the last two days since the permission was given for the additional exports, prices of Sankar-6 variety have gained Rs 1,000 a candy of 356 kg. (see box).

“There is no major demand. Exporters and traders, too, have no clear idea of the policies and how the quota is going to be allocated,” said the official of the Saurashtra Ginners body, which had observed a three-week strike until the Government allowed additional cotton exports.

The Centre had initially allowed exports of 55 lakh bales of cotton for the current season that ends in September. Shipments began on November 1, while the entire quota got exhausted by January 15. Since then, the Government has been under pressure to allow more exports.

At one point of time, demand for exports and from the domestic industry had boosted cotton prices to a record Rs 62,500 a candy. After that, prices have dropped nearly 35 per cent before the plunge reversed on Thursday.

Exporters and ginners have been seeking additional exports on the ground that cotton production this year has been projected at a record 329 lakh bales by the Agriculture Ministry. The Textiles Ministry, however, has pegged it lower at around 310 lakh bales. The Cotton Advisory Board, which has representatives from the industry, growers, government and trade, has pegged the output at 312 lakh bales against 295 lakh bales last season.

“The additional quota will be utilised by Bangladesh, Pakistan and China,” said Mr Lal.

“The Centre should have allowed more export as there is no demand in the domestic market. Bangladesh, Pakistan, China, Vietnam and Indonesia are looking for cotton,” said Mr M.P. Patel, Managing Director of Rajkot-based Jaideep Cotton Fibres. “We have got enquires from Pakistan especially,” he said.

“There is demand contraction and cotton sales will not be as expected. But India could enjoy from the lower price at which its cotton is offered,” said Mr Ramani.

Currently, Indian cotton is quoted at 145 cents a pound against comparable global quality cotton quoting at 160 cents.

“The fact is that there is more demand for the B-grade cotton rather than the A-grade. Buyers abroad are looking for cheaper cotton,” said Mr Poppat.

The B-grade cotton is quoted at 95 cents a pound now.

“There is too much difference between A and B grades. Therefore, demand for B grade will be more,” said Mr Poppat.

“The reality is that cotton is at the fag-end of the season. Therefore, the quality will not match the A grade,” said Mr Lal.

“The Cotton market is not looking good at present globally. Even abroad, spinners are facing a difficult period,” said Mr Ramani.

However, Mr Patel said demand for A or B grade cotton depended on the buyer abroad. “Would you expect someone like Raymonds to buy inferior quality cotton?” he asked.

A Kolkata-based exporter said he could find no buyer for the cotton he was willing to offer.

“Prices could crash in the next couple of weeks once the reality sinks,” he said.

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