With China paring its cotton stocks and demand continuing to surge, Indian cotton exporters see an opportunity for the current season.
As per the International Cotton Advisory Committee (ICAC) estimates, ending stocks in China decreased by 13 per cent to 11.3 million tonnes (mt) as the Chinese government sold over 2 mt from its official reserves from May through September 2016.
The situation is seen favouring India as shipments of the fibre to Pakistan, one of the major buyers of cotton from India, has remained muted due to military action in the border.
“Currently, China is seen buying its cotton requirements from the US. But our prices are as competitive as other international prices. Hence, we can expect exports to China take place once the cash crisis in India subsides. Currently, all cotton trades are on hold,” said S Stalekar, Vice-President, Cotton division, Sagar Group of Enterprises.
“There wonΆt be any impact on domestic cotton availability. Exports to Pakistan is not happening, so shipments of about 10 lakh bales (of 170 kg each) to China would be an encouragement to Indian exporters,” he said adding that India exported around 30 lakh bales to Pakistan.
However, the Chinese government has restricted import quota to the volume required by its WTO commitments in 2015 and 2016 and announced that it will continue to do so in 2017.
The stocks in China are expected to decline by 15 per cent to 9.6 million tonnes by the end of 2016-17.
ICAC has projected world cotton production at 22.4 million tonnes for 2016-17, 7 per cent higher than last year. “India will remain the worldΆs largest cotton producer, although its production is forecast to remain unchanged from 2015-16 at 5.8 mt. Output in China is projected to decrease by 4 per cent to 4.6 mt, while production in the United States is expected to grow by 24 per cent to 3.5 mt,” ICAC statement said.
ICAC has projected IndiaΆs cotton exports lower by 34 per cent to 825,000 tonnes for 2016-17 against the projected 1.2 million tonnes for 2015-16.
On the consumption front, world cotton consumption may remain unchanged at 23.8 mt for 2016-17, despite the widening gap between polyester prices and international cotton prices, ICAC noted. The mill use may rise in three of the top ten consuming countries — Bangladesh, Vietnam, and the United States. “This will offset losses in China, Turkey and Brazil, where mill use is likely to reduce,” it said.
In the prevailing scenario, ICAC raised its forecast for cotton prices amid lower stocks across the world including China. It projected prices higher by 4 cents to 74 cents a pound for 2016-17 as measured by the Cotlook A index of physical values. Last yearΆs price of cotton was 70 cents a pound, while it was 71 cents a pound in 2014-15.
