Indian cotton exporters cancelling orders with the hike in prices

The world’s biggest cotton producer India likely to help rival suppliers like Brazil, the United States and some African countries boost exports. As Indian cotton exporters after a supply shortage pushing up local prices have cancelled orders for around 25,000 bales and postponed shipments of about 200,000 bales by up to a month.

While, some India textile mills have even started to import cheaper fibre from overseas.

Exporters had signed contracts at around 75 cents (per lb) in December and January. Now (local) prices have shot up to 84 cents. An exporter based in Mumbai said that they could not fulfil the orders, adding that contracts to export nearly 25,000 bales to Pakistan and Bangladesh have been cancelled.

Pakistan, Bangladesh, China and Vietnam are key buyers of Indian cotton.

Raw cotton supplies usually peak in India between December and February, pushing down prices. This year, local prices have jumped more than 10 percent over the past two months, with farmers now delaying cotton sales in expectation of further price rises.

Chirag Patel, chief executive of Indian exporter Jaydeep Cotton Fibres said that limited supplies in spot markets has forced some exporters to delay shipments. They would be delaying shipments by 15 days to one month

Hike in cotton prices is the result of fall out government’s move to scrap high-value currency notes, which disrupted trading in the cash-oriented market. Traders estimate farmers sold 15.5 million bales of cotton between October and January, down nearly 19pc from last year’s 19.11m bales.

India has exported around 2.5m bales so far in the 2016/17 season that started on Oct. 1. In 2015/16 India exported 6.9m bales, but this year exports could fall 28pc to 5m bales, according to a senior official with Khimji Visram & Sons (KVS), a Mumbai-based exporter.

Exports is likely to pick up only if Indian prices come in line with international prices. If they are not competitive, exports will be limited. It could be even less than 5m bales. However, right now Indian cotton is not competitive. Export demand is not much..