Agri Business

Will the recent surge in prices impact cotton exports?

Rutam Vora Ahmedabad | Updated on November 30, 2020 Published on November 30, 2020

CAI had earlier projected India’s cotton exports to touch 60 lakh bales for the season 2020-21   -  THE HINDU

Exporters still hopeful of exporting 50 lakh bales as Indian prices remain competitive

Recent uptrend in cotton prices is likely to impact the projected exports of cotton.

Parts of cotton growing regions in Maharashtra and Gujarat have faced pink-bollworm infestations in cotton crop, which have dented the crop outlook. On the other hand, the ongoing farmers’ protest has impacted the cotton arrivals in North India triggering surge in prices to ₹41,400 per candy (each of 356 kg of ginned cotton of 29 mm variety).

“Prices have surged quite significantly and we have crossed the pre-lockdown rates of ₹39,000 last year. Now we are closing towards ₹42,000 which is around 70 cents per pound. It looks like this will stop increasing and stabilize at this level. At this rate, there is no parity in exports so it is difficult to achieve the export target of 60 lakh bales,” Atul Ganatra, President, Cotton Association of India (CAI) told BusinessLine.

Exports outlook

Earlier this month, CAI had projected India’s cotton exports to touch 60 lakh bales for the season 2020-21, about 20 per cent higher from 50 lakh bales estimated for the previous season.

Cotton prices have been on the rise for the past month. In September-October, cotton prices ruled in the range of ₹38,700 to ₹40,200 per candy, which worked out to about 66 cents for a pound.

This was considered much lower than key markets of US (75.40 cents), West Africa (73.40) or Brazil (70.40). Looking at this favourable price proposition, cotton trade was betting big on exports. Trader sources, however, maintained that even after the recent spurt in the prices, India’s cotton would continue to remain competitive in the international market. Thus the overall exports of the fibre may not fall below the previous year’s levels i.e. 50 lakh bales (each of 170 kg).

‘Still the cheapest prices’

Vinay Kotak, Director, Kotak Commodities, said: “We will continue to be cheapest in the world. Don’t see any impact of recent fluctuations in prices on overall exports. We may retain last year’s 50 lakh bales, if not more.”

Currently, there are no big inquiries from overseas markets but China and East Asian markets including Vietnam and Bangladesh are buying from India. “There is going to be some arrival pressure in the market in the coming months. So prices will stabilise,” said Kotak. ICE December Futures are hovering in the range of 71.5 to 71.68 cents per pound, whereas far month contract for May and July 2021 quoted at 74.12 and 74.65, respectively pointing at a further room for an upside in the international cotton market.

Exporters hinted that rains, pest infestations and North India’s farmers’ agitation has temporarily pushed up prices in the domestic market. “The prices are expected to go down as the cotton production is expected to be more than last year. And there is not much demand from the end consuming sectors in the rest of the world. So there will be some respite in prices after about two weeks,” said a cotton exporter from Ahmedabad.

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Published on November 30, 2020
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