Orders from Pakistan makes Indian cotton exports look bright

Indian cotton exports look bright with sudden spurt in Pakistan’s cotton imports from India which is likely to see a rise mainly due to the recovery seen in rupee value and production of lower volumes of prime quality cotton produced in Pakistan this year. Experts are also of the opinion that Pakistani spinning mill owners prefer high quality Indian cotton compared with that from the US or Brazil, moreover the cost and transportation time in case of Indian cotton are much lower. Indian origin cotton is also receiving good export orders from Bangladesh as well.

During the first week of the current year Pakistan has imported nearly 300,000-400,000 bales of cotton from India. This fresh import has taken Pakistan’s cotton import from the country to 1.1 million bales in FY13 itself. And going by the projected figures, Pakistan is likely to import 2.5 million bales of cotton in this calendar year.

However, precisely at the same time, thanks to higher duties on raw fibre and rising labour costs, China is now reducing cotton purchases and shifting to the value-added yarn from India, especially Gujarat. Much of the cotton used by China to manufacture garments was imported from India, 80-90 per cent of which come from Gujarat alone.

According to the latest DHL India Trade Outlook, China is likely to discontinue its policy of procuring cotton at a minimum support price (MSP) that is higher than the prevailing global average, thereby affecting India’s yarn exports, which will translate into lower demand for cotton yarn, and hence eventually cotton.

In such a scenario on the exports front, one needs to take a look at the production scenario of cotton in the country. During the ongoing cotton season, India’s cotton production is projected to increase by 5-7 per cent, mainly driven by higher productivity. Average yield levels, which fell in 2012 on the back of erratic rains, are expected to improve, as the monsoon in 2013 has been good and timely, according to experts.

Indian Cotton Federation, formerly the South India Cotton Association (SICA), has estimated cotton production for the ongoing cotton season 2013-14 at 36.1 million bales of 170 kg each. In an official communiqué ICF, president, J Thulasidharan said that cotton crop has been delayed by about four weeks time this season, but the quality is good. Although arrivals are restricted at present, they are likely to pick up after January 15, and prices might ease thereafter.

Out of the estimated cotton production of 36.1 million bales, Gujarat is likely to contribute 12.5 million bales, followed by seven million bales by Maharashtra, 6.5 million bales by Andhra Pradesh, and about 5.5 million bales by the three North Indian states of Punjab, Haryana and Raja¬sthan. Mad¬hya Pradesh and Karn¬ataka are likely to produce 1.8 million bales each, while Tamil Nadu is expected to produce 0.5 million bales, as per ICF estimates.

On the pricing front, the latest DHL India Trade Outlook suggested that post cotton season 2013-14, cotton prices in India are likely to decrease as demand slumps. In the previous cotton season 2012-13 that ended in September 2013, domestic prices averaged Rs 107 per kg, nearly 6 per cent higher than the previous season’s average.