With domestic cotton prices continuing to rule higher than rates in the global market, traders see bleak prospects for the export of the fibre crop in the near term. This is even as cotton arrivals across agricultural produce marketing committee (APMC) yards are gathering pace across key producing regions. Farmers, however, prefer to hold back their produce, expecting higher prices.

Normal export period

Trade sources expect market arrivals to pick up from early December after the elections in Gujarat, the largest producer, and over the next few days in Maharashtra and Telangana.

“The Indian cotton rate is higher by ₹6,000 per candy (of 356 kg). So, we have no buyer for cotton and no such demand. There are no shipments happening at current prices due to unfavourable prices. said Atul Ganatra, President, Cotton Association of India (CAI), the apex trade body

Normally, the bulk of the cotton exports happens during the October–January period, coinciding with the peak market arrivals. “In these four months, we carry out 60 to 70 per cent of our exports,” Ganatra said.

CAI, in its estimates for the 2022–23 crop season (October–September), has pegged exports lower at 30 lakh bales (170 kg each), a drop of about 30 per cent 43 lakh bales in the previous season.

Unable to compete

“Exports are not taking place because Indian prices are 5–6 per cent higher than the international market. Buyers in Vietnam and Bangladesh are getting cotton from the US, which is cheaper than Indian cotton. Also, they are selling yarn at a lower price, which Indian mills cannot compete with,” said Ramanuj Das Boob, a sourcing agent for multinationals in Raichur, Karnataka.

He further said the demand is muted from spinning mills, which are buying on a need basis. Also, there is no demand for yarn exports, while fabric exports are slow.

Crop higher than estimate?

However, Origo Commodities believes that exports could be higher than CAI estimates. “We are hopeful that exports will be at least at last year’s levels or slightly higher at 45-48 lakh bales as we are expecting a crop size of 360 lakh bales, a bit higher than CAI estimates. As per our ground survey, the crop in Gujarat and Maharashtra is doing well at this point in time, and farmers are holding a lot of stock this year. Farmers are bringing cotton to markets in small quantities, and that’s the reason why arrival pressure is not yet seen in the prices,” said Rajiv Yadav, Senior VP, Origo Commodities.

On the consumption side, there could be a drop due to recessionary fears and the impact of interest rate hikes. However, the world stocks are at a bit lower level, and we feel that could drive the demand for exports, Yadav said. The demand has been delayed this year, and so also the crop arrivals. However, with the expected pick up in arrivals in the weeks ahead, we could see some export enquiries, Yadav added. Prices are ruling at ₹31,863 per bale at Kadi. “Unless the prices go beyond the Rs 33,278 per bale levels, then they would trade bearish,” Yadav said.

CAI has pegged the 2022–23 crop size at 344 lakh bales, as also the Ministry of Agriculture.