Chinese demand may fan Indias cotton exports

Written by fe Bureau | New Delhi | Updated: Jan 26 2013, 07:35am hrs
A recent rally in global cotton prices has offered a fresh boost to Indian exports after domestic prices stayed above the international level for most part of the past one year, senior trade executives said on Friday.

Traders say China has started piling up stocks after a brief lull late last year, giving a fresh push to global cotton prices. Domestic exports have also got a leg-up as China is the biggest buyer of Indian cotton, prices of which exceeded the global level for the first time in three years in last July due to a drop in demand from the communist nation.

The state-run Cotton Advisory Board this week revised up export forecast for 2012-13 to 8 million bales from 7 million bales announced earlier. China is the wild card now. If it continues to purchase and the Indian government doesn't curb shipment, exports may touch 8 million bales in 2012-13 (the marketing year through September), said a senior trade executive with a Mumbai-based export house. The exports would still be much lower than the last year level of 12.9 million bales, thanks to the ravenous appetite of China. One bale equals 170 kilograms.

Around 2.4 million bales have already been shipped, said the executives.

Cotton futures rose for a seventh straight session through Thursday the longest rally in around two years on apprehension that production in the largest exporter, the US, would drop just as demand returns in biggest consumer China. Although prices have dropped a tad on Friday to 82.13 cents per lb, mainly on profit booking, they are still up nearly 8% so far in January and are heading for the sharpest monthly gain since February 2011. Prices of certain varieties are now marginally lower than global levels, and continued Chinese purchases would make Indian exports more attractive, the trade executives say.

The cotton crop in the US is expected to be 1.4% lower than estimated in December, the US Department of Agriculture said earlier this month. Moreover, a latest report by Rabobank that the US harvest may drop to 14 million bales this year from 17 million a year before drove up the fibre's prices.

An Indian ministerial panel in November decided the exportable surplus of seven million bales as was determined by the CAB then would be adehered to in the registration of shipment contracts during 2012-13. The panel comprised agriculture minister Sharad Pawar, finance minister P Chidambaram and textiles and commerce minister Anand Sharma. To facilitate exports, the ministerial panel had also relaxed cotton shipment registration rules. Traders can now export up to 30,000 bales of cotton against each contract compared with 10,000 bales.