Indian cotton exports may plunge to 19-year low

India’s cotton exports will likely decline to a 19-year low this season (October 2022-September 2023) on poor demand for importing nations in view of the economic slowdown in the US and Europe.

According to the US Department of Agriculture (USDA) “Cotton: World Markets and Trade”, Indian cotton exports are projected lower by 500,000 bales this month to 1.8 million (US bales of 227.72 kg or 23.05 lakh Indian bales of 170 kg), roughly equal to its import forecast.   

“So far, only 9.5 lakh bales (170 kg) have been exported since the beginning of the season in October. I see exports not exceeding 20 lakh bales,” said Anand Popat, a Rajkot-based trade in cotton, yarn and cotton waste.

Import to exceed export?

If Popat’s estimates turn out to be true, then cotton shipments will drop to the lowest seen when Indian began planting genetically-modified cotton. 

“Exports have historically exceeded imports by a significant margin, and the last time that imports exceeded exports was nearly 20 years ago,” the USDA’s report said. 

Data show that cotton exports in the 2004-05 season were 10 lakh bales after which shipments from the country surged to top 100 lakh bales in early 2010s. In 2008-09, exports were 35 lakh bales and it remains to be seen if shipments exceed this.

The Cotton Association of India, a body of traders, has estimated exports at 30 lakh bales against 43 lakh bales last season. The Committee on Cotton Production and Consumption, a body comprising textiles industry stakeholders, had in November pegged exports at 40 lakh bales. 

Bangla only buyer

“Shipments of cotton this year have been minimal. Only Bangladesh seems to be buying some quantity. Other imports have not shown interest,” said Ramanuj Das Boob, a sourcing agent for multinational companies in Karnataka’s Raichur. 

“One of the biggest drawbacks in exports this year is that China has not imported. It seems to be sourcing its needs locally. Even Bangladesh has imported less as it is facing foreign exchange problems,” said Popat. 

Vietnam, another significant buyer, has been keeping a low profile.  The USDA said China’s cotton production this season is higher as well as its consumption, while the offtake has been lower in Bangladesh and Turkey, two main importers of Indian cotton. 

May continue till H2FY24

“China has been sourcing cotton for its yarn locally. Overall, there is no support for exports as demand has been slack,” said Popat.

Prabhu Dhamodharan, Convenor, Indian Texpreneurs Federation, said demand for Indian cotton abroad may not pick up until the second half of the current fiscal. 

“Export demand for cotton will be muted this year. Capacity utilisation in other textile manufacturing countries is at lower levels and will inch up only gradually and move towards a steady state of business status in H2 of FY24,” he said.

The International Cotton Advisory Council (ICAC) said cotton arrivals in India had been delayed, resulting in its production estimates being lowered twice. It has currently lowered Indian cotton production projections to 305.88 lakh bales.

Low arrivals

The USDA estimates India’s cotton production this season at 313.76 lakh bales. The Ministry of Agriculture, in its second advance estimates, pegged the output at 337.23 lakh bales, while CAI sees it at 313 lakh bales. 

“The arrival numbers have been unusually low, possibly because farmers — who so recently enjoyed near-record-high prices — are holding onto their cotton in the hope that prices, which have dropped recently, start to trend upward again,” the ICAC said.  

This season, farmers have been parting with their produce slowly expecting better prices. Their expectations stemmed from the record prices of ₹12,000 a quintal they fetched last season for kapas (unprocessed cotton). 

Currently, kapas is fetching about ₹8,000 in agricultural produce marketing committee (APMC) yards in Gujarat against the minimum support price of ₹6,080. Processed cotton or lint prices are currently quoted at ₹62,550 a candy (356 kg) for the benchmark Shankar-6 variety. 

On MCX, cotton for delivery in June is ruling at ₹64,100 a candy. On InterContinental Exchange, cotton for delivery in May is quoted at 82.75 cents a pound (₹53,675 a candy).

Traders point out that Indian cotton is quoting at a premium to global cotton prices and it is one of the reasons for exports slipping over the last two seasons. 

“Indian cotton’s quality is not of international standard. Therefore, there are questions about the premium at which it is quoted,” said a trader who did not wish to be identified.

Imports set to gain pace

On the other hand, imports of cotton could gather pace from June onwards with India’s free trade agreement with Australia coming in handy.

Austrade has been bringing in cotton shippers and hard selling Australian cotton across India. In May, another delegation will be visiting Coimbatore, Ludhiana and Mumbai to sell Australian cotton, said Das Boob.

“Australian cotton could begin coming into India from June-July,” Popat said.

According to the USDA, nearly three lakh bales of Australian cotton could be imported into India duty-free after the signing of the free trade agreement. Beyond that, cotton imports will attract 11 per cent customs duty.