US-China trade war: India’s cotton exports to China may see a fivefold jump
US-China trade war: India’s cotton exports to China may see a fivefold jump

US-China trade war: India’s cotton exports to China may see a fivefold jump

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Indian traders have already entered into a forward contract with Chinese buyers to deliver about 1.2 million bales between November and January.

India’s cotton exports to China may see a fivefold jump to 4 million bales in the marketing year starting October 1 (2018-19), after the neighbouring country slapped a 25% additional duty on imports of the fibre from the US on July 6, amid the trade standoff between the world’s two biggest economies, trade sources said.

Indian traders have already entered into a forward contract with Chinese buyers to deliver about 1.2 million bales between November and January, these sources added. Though some quantities have been contracted for exports to Bangladesh and Cambodia as well, maximum contracts have been with China.

China is set to return as a major cotton importer, taking 10 million to 15 million bales each year by 2019-20, Reuters has reported recently, quoting an analyst at trading house Louis Dreyfus Company.

However, a likely decline in India’s cotton production in the next season, low closing stocks (2.2 million bales) and higher minimum support prices announced recently might dent India’s export prospects, analysts said.

India is slated to conclude cotton exports of 0.8 million tonnes to China in 2017-18 (October-September) season. In value term, the country’s exports of the fibre peaked at $3.4 billion in the financial year 2011-12 and has since fallen sharply to $133 million in FY18; in April-July this fiscal, the exports were $119 million.

“China’s cotton stocks have reduced and it has been a net importer to meet its garment demand,” said Atul Ganatra, president of the Mumbai-based Cotton Association of India.

China has an annual output of 35 million bales against consumption of about 50 million bales. The country has not been able to increase cotton production in recent years since the focus shifted to food and feed crops. China’s buffer cotton stocks began depleting since 2015.

The Gujarat government has come out with its first production estimate of 8.8 million bales for 2018-19 cotton year, down from 10.6 million bales produced last year, Ganatra said. Gujarat, the largest producer of cotton among Indian states, may further cut the estimate, he said.

India’s cotton output for the 2017-18 (October-September) season is pegged at 37 million bales, up 7% from the previous year; while traders say next season’s output would be slightly less than this year’s, the Cotton Advisory Board hasn’t made any estimate so far.

Thanks to the new minimum support price, cotton prices will rise by a whopping 28%, from Rs 40,200 per tonne for kapas to Rs 51,500 per tonne. Given the conversion ratio of around 33%, this means the prices of finished cotton will rise to about Rs 156,400 per tonne, up 20% from the current global prices. At this price, India’s cotton exports will be uncompetitive, though the rupee’s fall would cushion the fall a bit, according to DK Nair, former secretary general of Confederation of Indian Textile Industry.

India had pipped China to be the world’s largest cotton producer a couple of years ago.

By- Prabhudatta Mishra

Πηγή: financialexpress.com

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