Indian cotton exporters fulfilled forward contracts order with Chinese buyers at a loss

Indian Cotton exporters who had entered into forward supply contracts with buyers mainly from China for December and January in the range of Rs 38,500-41,000 per candy had to settling them at a loss as when they actually entered market to procure cotton to fulfill that orders. As cotton price has gone up nearly by 10% in last one and half month to Rs 43,000 per candy.

The cotton price had increased to over Rs 43,000 per candy in major markets like Gujarat and at this price level export was not viable as global cotton price was down.

According to ginning industry sources about 700,000-800,000 bales of cotton have been contracted by Indian exporters with ginners for commitments of December to March. But with sharp increase in prices when cotton arrived in the market these exporters were in a fix.

Meanwhile even Chinese buyers found that they don’t need that much cotton and wanted to get relieved from buying and this had helped exporters getting an opportunity to exit. However buyers gave them some concessions but still exporters had to bear a little loss and deals are understood to have settled around Rs 41,500 per candy a few days ago

While china’s cotton buying has reduced and out of 60-65 lakh bales that have been shipped so far, China’s share has come down to over 60% from much higher earlier. However cotton exports to other parts of the world is said to be increasing.

Due to higher price, new contract for cotton export from India has stopped since past one week.

Dilip Patel, president of All Gujarat Ginners Association said that if price does not come down cotton export may not start in near future.

During January, cotton price was increased about Rs 2,000 and traded on Rs 43,100-43,200 per candy, but as export demand has reduced and also domestic mills buying activity comes down, price of cotton has decreased and now traded on Rs 42,200-42,300 per candy.

According to Arunbhai Dalal, of Arun Kumar & Co, a leading cotton trader from Ahmedabad Indian physical market to witness tough time in coming weeks and price will be under pressure.

India was able to export hardly 50 percent of target and commitments were canceled by settlement this year, due to overvaluation. India lost the rhythm to achieve export of surplus cotton while, US and Africa got big share in the last month.