Rise in exports assist India to trim spending on cotton purchases

Cotton crop failure in Pakistan has led to coercion for the nation to raise its imports following the hike in local prices. This has profited the world’s largest producer of the cotton fibre. The Indian Government’s cotton purchases are to plummet to 89% due to the increased exports in the 2015-16 marketing year.

B.K. Mishra, chairman and managing director of the state-run Cotton Corporation of India (CCI) said that prices have been moved above the MSP (minimum support price) level in most states and farmers are selling to private players.

In a scheme to assist India’s cotton farmers, the CCI buys raw cotton fibre from them at Rs. 4,100 per 100 kg, while in spot markets prices have risen to Rs. 4,300 to Rs. 4,800.In the year to Sept. 30, India spent Rs. 160 billion to buy 8.7 million bales at the MSP as top consumer China started slashing imports.

The increase in shipments to Pakistan, Bangladesh, and Vietnam will help India trim spending on cotton purchases by nearly Rs. 140 billion ($2 billion) in the year that started on Oct. 1, although the rise in volumes on the international market will cap recent gains in global prices.

Pakistan’s overall cotton imports are seen climbing to at least 4 million bales in the year that started on Aug. 1, from 1.2 million bales in the previous year due to an estimated 25 percent drop in its own production.

India’s cotton exports in the 2015-16 season are expected to rise 18 percent to 6.8 million bales.

In the current marketing year, the government purchases were again expected to rise to last year’s level due to poor demand from China. But a sudden increase in demand from Pakistan and a decision by India’s top producing state Gujarat to buy from farmers at levels higher than the MSP boosted prices and reduced the need for state support.

The government will likely spend just Rs. 20 billion for procurement of 1 million bales this year, Mr. Mishra said that they have bought 700,000 bales so far, but henceforth they are expecting a slowdown in purchases due to rising prices.

Spot prices of ginned cotton in India have risen nearly 5 percent in a month to Rs. 33,200 per candy of 356 kg.

Dhiren Sheth, president of the Cotton Association of India added that demand is healthy for Indian cotton from Pakistan and other Asian countries and prices could stabilize around the current level. India has so far contracted 3.6 million bales for exports, including nearly 2 million bales to Pakistan.