Cotton exports to get boost from floods in Pakistan

Written by Banikinkar Pattanayak | New Delhi | Updated: Oct 29 2011, 08:54am hrs
Cotton exports by India, the worlds second-biggest supplier, are set to get a boost as the fibre crop in big buyer Pakistan has been inundated in many regions, increasing its reliance on overseas purchases for a second successive year to keep its textile mills running, industry executives said on Thursday.

Senior executives at export houses say Indias cotton shipments may rise to around 9 million bales, of 170 kg each, in the year through September 2012, compared with 6.8 million bales in 2010-11, mainly because of the absence of any restrictions and crop losses in key nations due to rough weather. But sales realisation may still lag last years level when global stockpiles plummeted to a multi-year low, triggered by floods in big producers as well as consumers, they added.

Pakistan, also a major textile exporter, is expected to import in large volumes from India in 2011-12 due to a smaller-than-anticipated crop, the executives said. Pakistan has trimmed its cotton output estimate by around 6% to 12.22 million bales for 2011-12 after monsoon rains lashed the key growing region of Sindh in August and September, they added. China and Pakistan are the top buyers of the Indian cotton, accounting for more than 80% of the countrys fibre exports.

A smaller harvest in Pakistan will likely narrow a surplus global output in 2011-12. Earlier this year, the International Cotton Advisory Council pegged global cotton consumption at 24.72 million tonne in 2011-12, compared with an output of 26.91 million tonne.

Pakistan has witnessed huge losses again due to floods this year. So we expect Pakistan along with China to import from India in large volumes again. Plus, the rupee depreciation will also help domestic exporters. So in terms of volumes, there will be gain as there is no restriction, but per tonne realisation is expected to be less, as global prices are unlikely to hit last years record level again, one of the executives said.

Domestic cotton prices, which hit R61,500 per candy, of 356 kg each, as of April 1 were ruling around R39,200 on Tuesday.

Cotton stocks level with Pakistani textile mills are low after last years massive floods. So they have to stock up this year. Although the global financial slowdown may hit some demand, I think exports will still rise as consumption will still be good, said another executive.

A crippling drought in Texas, the biggest cotton grower in top exporter, the US, this year will also increase demand for the Indian cotton, the executives said.

Indias cotton exports fell by more than 18% last year, as the government maintained a quantitative ceiling until late July.

Last month, the government announced the continuation of unrestricted cotton exports in 2011-12 until further notice, as the country is expecting a record harvest of 35.5 million bales this year on higher planting. Areas under the cotton crop rose 9% to around 12 million hectares in 2011-12 from a year earlier on wide-spread monsoon showers. The country produced 32.5 million bales of cotton in 2010-11.

Apart from cheaper domestic supplies, the rupee has also depreciated more than 8% against the dollar since September as investors banked on the haven appeal of the greenback amid the financial turmoil, making overseas dispatches more remunerative for Indian traders. US cotton futures rose on Wednesday due to fund buying, with the benchmark December contract on the InterContinental Exchange rising 0.64 cent to end at $1.0032 per lb.