Cotton imports may rise four fold as record exports deplete stocks

First cotton output forecast for 2012-13 to be delayed, may come by mid-October

Indian mills have contracted to import two million bales of cotton in the marketing year through September ? the highest since the BT cotton was introduced around 10 years ago ? after traders exported record volumes of the fibre earlier in the year, official and industry sources said on Thursday.

As much as one million bales have already landed up on domestic shores and the rest, mainly from Africa, may be delivered by end-October, senior textile industry executives said. The country imported 5,00,000 bales ? mostly high-grade varieties -in 2010-11, although this year they have purchased all varieties of cotton periodically to boost inventories, the executives said.

The state-backed Cotton Advisory Board (CAB), which firms up output as well as demand-supply estimates, had pegged imports of 600,000 bales for the entire 2011-12 in April, and raised the projection in August to 1.2 million bales. One bale equals 170 kg.

Domestic supplies have remained tight following record exports of around 12.7 million bales ? or nearly 37% of output ? earlier in the year when global prices were ruling firm on Chinese demand. However, as domestic stocks have got depleted in the process, local prices have exceeded the global level since July, official and industry sources said.

The ICS-105 variety is selling at R35,500 per candy of 356 kg in Gujarat, around 10% higher than a comparable variety in the US, the world?s largest supplier.

Moreover, below-normal showers in key producing regions of Gujarat and Maharashtra and a fall in areas under the crop have raised fears about a drop in output in 2012-13, which may further impact domestic prices. Saurashtra and Kutch regions of Gujarat, the country?s largest producer, have received 35% less than the usual rainfall by this time, while parts of Maharashtra, the second-largest producing state, have also witnessed an up to 33% deficit in showers.

As of September 7, cotton planting dipped by 4.6% from a year before to 11.34 million hectares, according to official data.

Worried textile mills have already started importing in huge volumes to prepare for a shortage in the domestic market and uncertainties over supplies next year have prevented a slump in domestic prices despite a fall globally.

US cotton futures have crashed 66% from an all-time-high of $2.197 a pound in March last year, as production rose while demand from textile mills tumbled on slowing economic growth. Cotton became the biggest loser in the past year among the 24 commodities tracked by the Standard & Poor?s GSCI Spot Index.

The CAB would take some more time to come up with its first crop forecast as the crop is yet to mature to a ball-bearing stage across states, except Punjab, due to poor rainfall initially, Textile Commissioner and CAB chairman AB Joshi told FE. The first forecast is expected to be delayed by at least three weeks and may be firmed up by mid-October, said another senior textile ministry official.

The forecast is crucial to the formulation of the government’s cotton export policy for 2012-13. The country has periodically imposed curbs on cotton shipments in the past two years to improve domestic supplies.

The country needs 25.5 million bales of cotton for consumption in 2011-12, while its output is pegged at 34.7 million bales, according to the CAB.