Cotton export turns viable

Traders expect Rs 700-1,000 a tonne of further fall in cotton price by mid-Nov

The crash in cotton prices over a month, due to a better than expected crop and increased arrivals, has had exporters starting to look at signing of contracts for future shipments.

The benchmark Shankar-6 variety has fallen 19 per cent in a month, to Rs 10,629 a quintal. During this period, the benchmark Number 2 cotton futures for near-month delivery on the InterContinental Exchange rose a marginal 0.1 per cent, to trade at 69.26 cents a pound. This makes exports viable, noted Kavita Gupta, textile commissioner in the central government.

Exporters are waiting for a further fall in local prices before they initiate the signing of contracts with traders for assured supply, before dealing with foreign buyers. Daily arrival of the new cotton crop has been over 100,000 bales (a bale is 170 kg) this week, higher by about 30 per cent than the 80,000 bales of arrival in the last week of October 2015.

“Normally, arrival picks up only in November every year,” said Dhiren Sheth, president, Cotton Association of India, not as swiftly as it has this year. The daily arrival could touch 200,000 bales by end-November.

The Cotton Advisory Board (CAB), chaired by the textile commissioner, has estimated a bumper crop this year, of 35.1 million bales, up 3.8 per cent from the previous year.

“Traders anticipate at least Rs 700-1,000 a tonne of further fall in price by mid–November, when arrival of the new season crop hits mandis in full swing,” said M B Lal, former chairman of Cotton Corporation of India and now managing director of Shail Exports.

The textiles ministry, however, estimates a sharp decline in exports at five million bales during 2016-17 (October this year to next September), as against 6.9 mn bales the previous year. That is because Pakistan, which took nearly 40 per cent of 2015-16 exports, has had a bumper crop. “Last year, exports to Pakistan not only compensated the decline to China but helped increase the overall shipment. The crop in Pakistan was very bad due to a pest attack. This year, however, no such attack was reported,” said Gupta.

Lal thinks markets in Bangladesh and Vietnam could be explored. “Overall export, therefore, is unlikely to decline,” he felt.