1. GST impact, local trends may make cotton import contracts fall

GST impact, local trends may make cotton import contracts fall

Cotton imports this season have been the highest so far having crossed the 30-35 lakh bale mark.

By: | Pune | Published: June 8, 2017 4:31 AM
GST impact, cotton imports, Cotton Corporation of India, United States, Australia, Indian mills, Jaydeep Cotton Fibers, Indonesia Exports have not crossed 35 lakh bales although we had estimated for 50 lakh bales at the start of the season.

Cotton imports this season have been the highest so far having crossed the 30-35 lakh bale mark. However, according to market reports, some of the contracts are now being cancelled or settled by mills in South India due to local market trends and GST. According to Pradeep Jain, a major cotton ginner from Jalgaon, contracts worth Rs 2-2.5 lakh bales have either been settled or cancelled because of the local trends. M M Chokalingam, chairman and MD-in-charge, Cotton Corporation of India (CCI) agreed and said that while the initial target was to import some 17-18 lakh bales, the country has crossed the 30-35 lakh bales mark. There have been reports of contracts being cancelled but these have to be verified, he said. The last time cotton imports touched a record high was in 2001 -02 when they were 25 lakh bales. In the 2015-16 season, India had imported 20 lakh bales of cotton. Buoyed by the good prices this season, farmers are expected to plant 15-20% more cotton in the 2017-18 season. The stocks are coming mainly from African countries, the United States, Brazil and Australia.Tightness in domestic supply is also boosting imports, as farmers hold off on deliveries in the hope of achieving higher prices later in the crop year. Usually Indian mills import cotton in the second half of the crop year as domestic supplies dwindle.But this year they began importing in January as local prices jumped due to limited supplies.

Interestingly, while traders seem to be positive about export, Chokalingam maintained that cotton exports which were brisk at the start of the season touching 30 lakh bales, has become subdued with international rates coming on par with India. Exports have not crossed 35 lakh bales although we had estimated for 50 lakh bales at the start of the season. “This is because the domestic and international rates are on par and therefore not much has been happening in the last couple of months. Touching the 50 lakh bale mark is going to be tough,” he said.

Traders, however, anticipate the export of some 5-7 lakh bales before the start of the new season. There is good demand from Vietnam that still needs to buy some cotton for their needs, says Chirag Patel, chief executive officer at Jaydeep Cotton Fibers, a leading exporter. Some demand is also present in Indonesia and Pakistan (which all depends on the policy situation between the two nations), he said. A major portion of the export has happened to Bangladesh, Indonesia, Pakistan and Vietnam and China at the start of the season, he said.

In the coming season, the country is likely to export some 500,000 to 800,000 bales of cotton to China. Although China had surplus cotton this season and did not look towards India for its requirement. There have been some issues with the quality of local cotton which has prompted the country to look towards Australia and America for imports since the country has not been able to get parity with Indian cotton, industry people pointed out. The state-run Cotton Advisory Board has forecast production of 351 lakh bales in the current crop year, but industry officials say production is likely to be around 340 lakh bales. Significantly, higher prices of previous year have pushed farmers to grow more cotton and now the world faced the possibility of over-supply.The country’s cotton output in 2017-18 may also rise given the forecast of a normal monsoon. India’s cotton area is forecast to increase by 7% to 11.3 million hectares in 2017-18 as farmers are encouraged by better returns due to high cotton prices and improved yields last year. Assuming yield is similar to the five-year average, production could increase by 3% to about 60 lakh tonne,” ICAC has said.

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