Uncertain crop conditions, a stronger rupee and weak international prices are some of the factors that are set to push India’s cotton imports for the year 2018-19 to a record in recent years.

Trade estimates suggest India may end-up importing cotton in excess of 27 lakh bales (each of 170 kg) on the dismal crop outlook following water scarcity in the growing regions of Gujarat, Maharashtra and Karnataka.

Lower global prices

As per the estimates put up by the Cotton Association of India (CAI), the cotton crop for 2018-19 may hover around 340 lakh bales, which is about 7 per cent lower than the 365 lakh bales recorded in 2017-18. The CAI sees imports at a record 27 lakh bales against last year’s 15 lakh bales — indicating a sharp jump of 80 per cent on a year-on-year basis. This is supported by weak global prices, which have touched their lowest levels in more than a year at 72.1 cents per pound for ICE futures on January 2.

“This year, we will see more imports than we saw in recent years. But the trend will depend on multiple factors. Even if imports are higher than last year, they will face quality limitations. All the good quality cotton of the US, Australia and Brazil has already been sold. For the remaining cotton, not all the Indian mills can consume that,” said Atul Ganatra, President of the Cotton Association of India.

However, with the global market being at lower levels, cotton imports appear attractive for mills. This may further push down domestic cotton prices thereby making it less remunerative for farmers.

In the wake of this, unconfirmed reports from government corridors indicated the possibility of an additional duty being imposed on cotton imports. Already import contracts have started taking place. About 3 lakh bales of the fibre are believed to have arrived till December 2018, while 2 lakh more are being contracted for the next 2-3 months.

Sharp fall

While exports are at a sluggish pace, at about 18 lakh bales till December end, another 7 lakh bales of cotton exports are committed for January. Hence, as against the estimate of about 50-53 lakh bales, 25 lakh bales of exports will take place by January end.

India’s cotton exports are likely to be lower by about 30 per cent owing to the unfavourable currency exchange rate and availability of cheaper alternative sources.

bl03Jancottoncol
 

Amid the trade war with the US, the world’s largest buyer, China, has focussed cotton purchases more on Australia and Brazil due to the cost advantage offered by those countries.

Grim prospects

“Because the rupee is very strong against dollar, international prices have gone down significantly in the last one year. US prices are very competitive, hence our export contracts are not happening. If the US-China trade tensions are resolved, there is a possibility with improved global prices. But, by then our crop will be exhausted,” said Vinay Kotak, Director, Kotak Commodities.

CAI’s crop projection for the year 2018-19 at 340 lakh bales may go down further given the dismal crop prospects in the key growing regions. Spot prices of the fibre’s 29 mm variety were at ₹43,300 a candy (of 356 kg).

Related Topics