Rise in demand from China, lower domestic prices and depreciation of the rupee has led to India’s forward export contracts of cotton more than doubling from about 700,000 bales in September 2017. Despite expected projections of tight supplies and increase in minimum support price (MSP) by the government, traders are hopeful exports will rise this fiscal.
Concerns like pest attacks in Maharashtra and Telangana, uncertainty over yield due to late sowing in Gujarat, a 2 per cent decline in area sown under kharif crops and increasing domestic consumption of cotton may limit exports. Traders, however, foresee strong factors supporting exports.
Out of the export contracts worth 14-16 lakh bales (of 170 kg each) signed by members of the Cotton Association of India (CAI), about three-fourths are for export to China, according to CAI president Atul Ganatra.
The 25 per cent duty imposed by China on US cotton imports will make Indian cotton more affordable to Chinese buyers, a report in a top Indian business daily quoted Ganatra as saying.
India could not sign as many forward contracts in 2017-18 due to restricted availability of cotton. Indian traders are upbeat this year because domestic cotton is the cheapest in the global market and demand from China is up.
Ganatra expects total exports to China to increase to 30-40 lakh bales this fiscal, up more than threefold from eight-nine lakh bales last fiscal.
Bangladesh and Vietnam are the other buyers that have signed some forward contracts for Indian cotton. Indian traders export maximum quantities of cotton in November and December as India is the only country where cotton is available at that time.