India expecting higher demand for cotton from Bangladesh

Textile Commissioner Kavita Gupta after a meeting of the state-run Cotton Advisory Board on Tuesday said that they are expecting higher demand from Bangladesh, Pakistan and Vietnam. This will offset poor demand from China.

India, the world’s biggest cotton producer, is likely to export 6.8 million bales in the 2015/16 season, up 18 percent from a year ago as demand from Asia is expected to improve, a senior government official said.

Higher exports will cap global prices, but raise domestic prices and help bring down government purchases at the support price.

In the 2014/15 season Bangladesh surpassed China to become India’s top buyer of the fibre as the world’s biggest consumer began cutting import quotas to stimulate demand for domestic cotton after it halted a state stockpiling programme.

China has in recent years taken more than half of India’s cotton exports, propping up Indian prices despite record output. In 2014/15 India’s exports dropped 51 percent from a year ago after China halved imports.

India’s production in the new season started on Oct. 1, is likely to drop 4 percent from a year ago to 36.5 million bales due to a lower crop area, pest attacks and poor yields due to a prolonged dry spell, Gupta said.

In 2015 India suffered its first back-to-back droughts in three decades, hitting yields of summer-sown crops like cotton.

Higher exports amid a drop in production would bring down closing stocks for the 2015/16 season to 3.8 million bales, down 27 percent from a year ago, she said.

India’s cotton consumption in the new season expected to edge up 1.7 percent to 32.3 million bales.

The state-run Cotton Corporation of India (CCI) spent 160 billion rupees ($2.44 billion) to buy 8.7 million cotton bales at a government-set minimum support price (MSP) in the marketing year that ended on Sept. 30, up from just 400,000 bales in the previous year.

This year too the government has urged the CCI to buy cotton from farmers as and when price drop below the MSP level.

Gupta further said that the government is planning to start a pilot project for farmers in Maharashtra under this project, if farmers sell cotton to traders below the MSP, then the government will transfer the difference between the MSP and market price directly to farmers’ bank accounts.