Cotton exports from the country are likely to touch seven million bales this marketing year started October 2017, up about 27% from the earlier estimate, due to a surge in demand,
particularly from China, as Indian cotton is selling at discount.
“Indian cotton is trading at huge discount not seen in many years. A lot of export inquires are coming mainly because of the discounts,” said Naveen Chaurasia, vice president at Olam Agro India Ltd, a Gurgaon head quartered agricultural products exporter and distributor.
With Indian cotton selling at discounts of 7-10 cents per pound, there is demand for all qualities of cotton, traders said. Traders have exported more than 1.5 lakh bales of cotton to China during last 10 days as China took counter actions after the US imposed trade restrictions on the Asian giant.
“We started getting inquiries right from the day the news of US taxes on China was
announced,” said Atul Ganatra, president of Cotton Association of India (CAI).
He said the trade’s earlier target was to export 55 lakh bales of cotton, but India had
already exported that much till March end. “Now we expect cotton exports to touch
upwards of 65 lakh bales,” Ganatra said. “If exports continue at this speed, we can easily
export 70 lakh bales”. As a result of this, India is expected to replace Australia as the second largest exporter of
cotton after China by the end of the 2017-18 cotton season, experts said.
Since the begging of the Cotton Year 2017-28 on October 1, 2017, of the total export of 55 lakh bales, India has exported about 6 lakh bales of cotton to China.
However, exporters are concerned about quality of Indian cotton as well as the uncertainty about the increase in minimum support price (MSP) that the government will announce for
2018-19. If the increase in MSP is substantial, as the government has announced that it will ensure 50% returns over cost of production, exporters think it could affect exports adversely.
Exporters claimed that international buyers come to India mainly because Indian cotton is discounted. The reason is that India has had a bad reputation as Indian traders export inferior quality
cotton, delay shipments, give false packaging, add moisture and cotton has some trash, industry insiders said.
“If the government does increase MSP to C2 plus 50% cost of production, then exports may become difficult,” an executive of a multinational trade house said on condition of anonymity. The executive said if the government implements Bhavantar scheme – where the government pays farmers the difference between MSP and prevailing market prices – after increasing MSP, then trade will remain competitive in export market. Ganatra of CAI, however, said MSP increase will not affect trade in any way.
“Tur prices increased from Rs 20/kg to Rs 200/kg, but no one stopped its consumption,” he said. “Cotton prices have been stagnant at Rs 4,000/quintal to Rs 4,500/quintal for many years. If our cottage prices increase then world prices will also increase,” Ganatra said.
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