Cheaper Indian cotton garners overseas orders

Cotton exports have begun to pick up as the Indian natural fibre has become the cheapest in the global market from February-end.

“We are at least 5 cents a pound cheaper than US cotton and 2-3 cents than African cotton. Lower shipping charges to nearby destinations give us an added advantage,” said Anand Poppat, Chairman and Managing Director of Jalaram Cotton and Proteins Limited in Gujarat.

Currently, the Shankar-6 variety, in demand for exports, is quoted at 66-68 cents a pound f.o.b (₹32,300-33,500 for a candy of 356 kg). In the domestic market, the average price is quoted at ₹32,000.

Chinese appetite fades “Demand from China is almost nil but we are getting enquiries from Bangladesh, Pakistan, Turkey, Indonesia and Vietnam,” said Poppat, also an official of the Saurashtra Ginners Association.

According to Edelweiss, China has not issued any additional import quota this year. It has been trying to reduce record stocks that have been built up over the last couple of years.

The International Cotton Advisory Committee (ICAC) has said that China’s ending stock (12 million tonnes) will account for 56 per cent of global inventory despite its efforts to cut it.

For the first time this season ending September, Indian cotton became the cheapest in mid-February.

Strong demand Usually, this trend emerges in November-December and as a result, exports peak during December-February, Edelweiss said, adding that Indian cotton finds good demand when it rules 3-5 cents below the global Cotlook A Index.

“The working price for exporters is 68-70 cents since the rupee has increased to 62.15 from 62.70 against the dollar. Otherwise, we were comfortable with 66-68 cents,” Poppat said.

Even if China were to buy cotton, the gain would be less since Indian exporters have already locked their stocks in bonded warehouses there, he said. Currently, ample cotton is available in India, while the US and Brazil have almost sold out their produce.

Export projections At least 35-40 lakh bales (170 kg) each have been exported since the beginning of the season ending September. They are, however, lower compared with the same period year ago, said Poppat.

Edelweiss said that exports are estimated to be 58 per cent lower compared with last year.

The Cotton Advisory Board (CAB), a body comprising growers, traders, exporters and the textile industry, has projected exports at 90 lakh bales this season against 117.92 lakh bales last season. The ICAC has also forecast lower exports, though it sees domestic demand growing four per cent year-on-year. CAB predicts domestic demand rising to 311 lakh bales against 298.88 lakh bales.

Referring to data from the Textiles Ministry, Edelweiss said demand for cotton till December increased 3.4 per cent over last year. Though exports are picking up, there is no danger of the domestic market being starved of supply.

CCI procurement The Cotton Corporation of India, which has bought from farmers as part of the Centre’s market intervention programme, will sell in the domestic market, said Poppat.

The Corporation has bought 74 lakh bales till February-end, said Edelweiss. Industry sources expect the corporation to buy some 90 lakh bales.

Edelweiss said if the CCI locks the produce it has bought from farmers, then, it will ensure that the carryover stocks are lower than last year. This is against the CAB projection of 38 lakh bales carryover stocks from 32 lakh bales a year ago.

As a result, domestic cotton prices could rule bullish in the medium term.

However, if the CCI times its domestic sale badly, then prices could come under pressure. The practice of spinning mills in South India buying cotton from West Africa later in the season could also help keep prices on leash, Edelweiss said.

The ICAC sees global prices ranging widely between 62 cents and 76 cents a pound with 68 cents being the mid-point.

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