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Cotton export prospects brighten on shortage in world market

Exporters are attracted by higher world prices; but domestic textile and garment manufacturers are worried they may be affected

The government has approved the export of 5.5 million bales (a bale is 170 kg each) of cotton his year. So far, 1.64 million bales have been registered with the Textile Commissioner of India. India is expected to produce 32.5 million bales of cotton this year and domestic consumption is expected to be at 22 million bales. For the first time, the registration of cotton bales has been done online. This will help ensure transparency in the market and eradicate any favourable stock takers.

Cotton prices in India have seen a tremendous rise in September, at Rs3,628 a quintal, from Rs 2,419 a quintal in September last year. That's an increase of 49.8% in a year. The price increase is in line with the hike in prices globally following floods in parts of China and Pakistan which has resulted in lower cotton production in these countries.

According to Motilal Oswal, "Since Q1FY11, cotton prices have increased by about 20% to over US$1/pound, primarily due to floods in Pakistan that damaged the cotton crop and the delay in harvesting of the new crop in India, China and Pakistan. As cotton prices continue rising, the export price of cotton yarn has gone up by 40-60 cents in the last one month."

Indian exporters are keen to export cotton for the premium they will get on the international markets. Motilal Oswal has pointed out in a recent report that Indian exporters are favourably placed. "Recent events in China, with regard to labour cost inflation and appreciation of the yuan are key positives for Indian exports. Increasingly, Chinese dominance of the global textile industry is declining. We believe that Indian textile and garment exporters are well placed to increase their market share," the report says.

But while cotton prices have been at an all-time high, cotton export has been deferred to 1 November 2010. At a time when the world market is looking to India to fill in the production shortfall, export has been delayed due to a difference in opinion in the corridors of power.

Textile and knitwear companies in the south have been pushing their representative bodies, like the Tirupur Exporters' Association (TEA), to ask Tamil Nadu chief minister M Karunanidhi to intervene to put off exports, so that they do not face any problem in getting their cotton requirements. They have demanded that exports not be allowed till 1 January 2011. This would ensure that they get their supply on time and without having to face a competitive export price.

In a letter to Dayanidhi Maran, union minister of textiles, TEA said garment units were apprehensive that higher cotton prices could lead them to shut down, affecting the livelihood of over 5lakh people employed at these units who are mainly women workers from the rural areas. The letter says that if the objective of allowing cotton export is to get better international prices for cotton farmers, they were already getting a good price and exports should not end up benefiting the multinationals.

There is also a feeling that if the deadline for exports is extended, farmers may hold on to their cotton stocks a little longer to earn a premium. 

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COMMENTS

rotimi abdulsalam

6 years ago

can i hoard cotton by october 2011

Food inflation likely to ease from November

Kolkata: The government today expressed optimism that food inflation would ease from November with the arrival of new crop, reports PTI.

"It is difficult to predict, but I think food prices are expected to soften from November with new crop hitting the market from mid-October," secretary to the ministry of statistics and programme implementation TCA Anant said here today.

However, food price inflation, which was at 16.24% for the week ended 25th September, would not go below 7%-8% till February-March, Mr Anant cautioned.

He emphasised that immediate supply of produce was an important factor under short- term dynamics because of weak food storage facilities.
 

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