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India’s cotton imports are set to double amid crop shortfall for the 2018-19 season which ends in September.
While cotton industry estimates imports to cross 30 lakh bales (each of 170 kg) for the season, double from 15.8 lakh bales reported last year, trade sources believe that cotton import shipments will be restricted to around 25 lakh bales as against estimated imports of 31 lakh bales.
“Out of the total contracted imports of 27 lakh bales for the season, about 14 lakh bales have already arrived at Indian ports till July-end, while additional 10-11 lakh bales are estimated to arrive by September. There is some delay in several shipments, due to which about 2-3 lakh bales are likely to arrive in October,” said Atul Ganatra, President, CAI. CAI had estimated 31 lakh bales of cotton imports for the year.
On the other hand, cotton prices will rule higher even amid increased imports as the shortage of fibre is likely to cause supply crunch till the beginning of the next season after October 2019. Trade estimates prices to hover between ₹44,000-46,000 a candy of ginned cotton (each of 356 kg).
The 2018-19 cotton crop is estimated at over a decade-low at 312 lakh bales. This prompted industry to look for cotton from global suppliers such as the US, Brazil and African counries.
Globally, the cotton prices have remained under pressure due to higher production than mill-use. As per the US Department of Agriculture (USDA) data, global stock for 2019-20 is likely to be higher at 80.4 million bales, about 1.2 million bales more than previous year.
The ICE Cotton December futures quoted at 63.57 cents per pound on Monday, down by over 19 per cent from its high levels of 76 cents about three months ago. However, the Indian cotton prices have fallen by about 5-6 per cent from ₹46,000 to ₹43,500 a candy (each of 356 kg) despite the prevailing shortage conditions.
“The crop is short by more than 10 per cent. The prices were expected to go up by 10 per cent in India, but reverse has happened and prices have gone down by 5 per cent. Due to the US-China trade issue, New York futures have not gone up, else Indian cotton prices would have shot up,” said Vinay Kotak, director at Kotak Commodities.
He added that increased cotton imports have already affected Indian prices but there is no likelihood of cotton prices to come down till November 15, when the fresh arrivals will get fed into the market.
Imports provide an economical proposition to traders and mill users as it saves at least ₹2,500 per candy for them. J Thulasidharan, Managing Director of Coimbatore-based Rajaratna Group of Mills said South Indian mills are increasingly depending on imports as it is a beneficial proposition for them. “The estimation of very low crop has created panic. As a result, we are seeing increased imports. There is huge price gap between Indian and foreign cotton, making it cheaper to import. On the quality issues, the international cotton comes with little trash and higher realisation, resulting in additional 2-3 per cent cost benefit,” said Thulasidharan, who is also President of Indian Cotton Federation.
He attributed the current plight of the Indian cotton sector to the recessionary trend in textiles and bigger global crop for the coming year.
Even as the Union Agriculture Ministry has projected cotton sowing for the kharif 2019-20 at 109 lakh hectares as on July 19, 2019 against the normal sowing of 121 hectares, experts keep a close watch over sowing progress. The Cotton Advisory Board (CAB)’s had projected last year's cotton sowing at 126.44 lakh hectares.
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