Lower Cotton Crop Trims Re Depreciation Benefits

The gains that cotton exporters expected to make due to the rupee depreciation have been pared because of the unseasonal rains in the cotton producing belts of Maharashtra, Gujarat and Madhya Pradesh. The recent unseasonal rains in the cotton producing belts will affect the standing crop. However, the extent of the damage cannot be predicted right away, said a leading cotton trader here.

According to sources, cotton output is likely to be around 16.5-16.7 million bales for 1997/98 (October-September). Untimely rains in the producing regions and the deteriorating quality of cotton seeds have reduced the possibility of a good crop.

The rupee depreciation, currently on, should benefit exports. However, we will not be able to get the best benefits due to the lower cotton crop this year, a leading exporter said.

We have a number of cotton varieties which is one of the reasons for the reduction in yields. We must reduce the variety and increase cotton yield, a dealer said. India had exported 16 lakh bales of cotton last year. This year it will be around nine lakh, said sources.

On the other hand, the US cotton prices have come down and are being offered around $68 per pound. The main reason for the decline was the rejection by China of the US short staple cotton shipment following the depreciation of the yuan, a cotton importer said.

US cotton exports may face a tough time as importing countries particularly in south-east Asia are facing a severe financial crunch. Besides the US is facing a glut in cotton following the record bumper crop in the new season an analyst said.

Meanwhile, traders said improved new crop supplies and sluggish mill buying had forced local cotton prices in to lose recent gains. An end to the unseasonal rains and clear skies resulted in a resumption of new crop arrivals in producing centres. Last week arrivals were low due to rain but now arr ivals are picking up again a broker said. In the spot deals Bengal-deshi lost Rs 10 at Rs 1,280/1,330 per maund (37.32 kg) while saw-ginned cotton slid Rs 5 to Rs 1,740/1,880 per maund.

Traders reported arrivals of about 12,000/13,000 bales in the Punjab region against 5,000/6,000 bales recorded on Wednesday. Gujarat cotton also suffered a setback as increased new crop arrivals prompted profit-taking by the stockist.