The Directorate General of Foreign Trade lastest data reveals that traders have registered contracts to export 93.54 million kg of cotton yarn in August, 8% lower than a year before and compared with 98.81 million kg in July, The registration of cotton yarn export contracts had hit 1,415 million kg in 2013-14, compared with 1,067 million kg a year before.

This is fifth straight month in August that Indian cotton yarn export has registered below the 100 million-kg mark due to slow-moving demand from China, while in the last fiscal year there was a surge by 33 percent, according to official and industry sources.

According to DK Nair, secretary-general of Confederation of the Indian Textile Industry, Chinese demand for Indian yarn witnessed a drop this fiscal. Domestic yarn prices have been falling, too, in sync with a fall in cotton prices.The problem is buyers bargain for a cut in yarn rates in step with the latest cotton prices without realising that the yarn was made of cotton bought in previous months at higher rates. So any price fluctuation hurts.

Cotton prices in Gujarat were ruling at R39,900 per candy of 356 kg as of October 4, down from R42,000 and R42,600 at the start of April and May, respectively. The expectation of a bumper harvest this marketing year that started on October 1, coupled with subdued prices globally, weighed on domestic rates.

Cotton price volatility in recent months has caught many mills off-guard as they couldn't pass on the rise in raw material costs entirely to buyers. The silver lining is Chinese demand seems to have picked up since September, and mills are betting big on robust domestic consumption in view of the festival and upcoming marriage season.

Prem Malik, CITI chairman is of the opinion that the festival season is likely to boost consumption of all textile products, while a pick-up in Chinese purchases, improvement in the US economy and a revival of demand in the EU would help boost exports.

The Cotton Association of India has forecast India to pip China as the world's largest producer in 2014-15, with output expected to hit 40.73 million bales, marginally higher than last year. However, cotton yarn exports fared better than other textile segments last fiscal.