Industry, textile ministry for freeze, as global prices rise.

A meeting next week in New Delhi to review the cotton scenario is being anxiously awaited by the trade and the textile industry.

The Union government has already allowed export of 5.5 million bales (a bale is 170 kg) and there is a proposal to allow a further 2.5 million bales. However, the textile ministry has taken the industry’s side in opposing this and is not in favour of allowing further exports till the supply situation becomes clearer.

Expecting further export permission, market prices have shot up to above Rs 46,000 a candy (356 kg) in Mumbai and Rs 47,000 in Gujarat mandis. Cotton prices rose 18.5 per cent in the past month on firm cues from global markets. The benchmark Shankar-6 was quoted at Rs 46,200 per candy in Mumbai on Thursday, as against Rs 39,000 per candy a month before. Unseasonal rain in some parts of the crop producing belt in Saurashtra had raised supply concerns, leading to a further jump in prices in recent days. Cotton was trading at Rs 25,000 per candy a year before.

The thinking within the textile ministry is that a decision on exports should be postponed for a month or so, by when the supply-demand situation will be known. So far 4.5 million bales have arrived in the market, 25 per cent more than at this time last year. Around 10 million bales are expected by November-end and a further eight million bales by mid-December.

Arun Dalal, an Ahmedabad-based trader, said, "Exports of cotton should be allowed but only after satisfying the needs of domestic textile industry and other users."

High global prices
"Cotton prices in India are linked with the global market and the movement there on either side directly affects the commodity’s fluctuation in the local market," said K F Jhunjhunwala, ex-president of the premier trade body, Cotton Corporation of India. "I am bullish for the future," he added.

On the ICE futures, cotton for near-month delivery hit a record high at $1.5123 per pound yesterday in late evening trade, a rise of five cent from the previous day. The US Department of Agriculture (USDA) recently lowered its global output estimate to 115.25 million bales from 116.7 million bales a month before. According to it, stockpiles will decline to 42.2 million bales this year, the lowest in 15 years.

Textile manufacturers in China, which consumes 40 per cent of world cotton output, are facing huge shortage, propelling the global prices to new highs. The USDA forecast China’s cotton import to rise to 13 million bales this year as against 10.9 million bales last year, again a drain on global stockpiles. Pakistan’s cotton crop was badly hit due to floods.

The Cotton Advisory Board, at its last meeting, forecast India's output at 32.5 million bales. "Arrivals are very good this year, as the crop is huge. The price is much higher than last year because the international cotton price is sky-high," said, Dhiren Sheth, president, Cotton Association of India.