Traders have exported more than 1.5 lakh bales of cotton to China during the last 10 days as China took counter actions after the US imposed trade restrictions on the Asian giant. With Indian cotton selling at discounts of 7-10 cents per pound, there is a demand for all qualities of cotton, traders said. We started getting inquiries right from the day the news of US taxes on China was announced,” said Atul Ganatra, president of the Cotton Association of India (CAI).
“Indian cotton is trading at a huge discount not seen in many years. A lot of export inquires are coming mainly because of the discounts,” said Naveen Chaurasia, Vice President at Olam Agro India Ltd, a Gurgaon-headquartered agricultural product exporter, and distributor.
As a result of this, India is expected to replace Australia as the second-largest exporter of cotton after China by the end of the 2017-18 cotton season, experts said.
Among other major exporters, the USA's cotton is sold out there are concerns about its cotton production as Texas region is facing drought-like conditions. Pakistan is now buying cotton.
India has the golden opportunity to gain the lost ground in cotton exports, feel exporters.
Since the begging of the Cotton Year 2017-28 on October 1, 2017, of the total export of 55 lakh bales, India has exported about 6 lakh bales of cotton to China.
Cotton exports from the country are likely to touch seven million bales this marketing year started October 2017, up about 27 percent from the earlier estimate, due to a surge in demand, particularly from China, as Indian cotton is selling at discount.
He said the trade’s earlier target was to export 55 lakh bales of cotton, but India had already exported that much till March-end. “Now we expect cotton exports to touch upwards of 65 lakh bales,” Ganatra said. “If exports continue at this speed, we can easily export 70 lakh bales.”.
However, exporters are concerned about the quality of Indian cotton as well as the uncertainty about the increase in minimum support price (MSP) that the Government will announce for 2018-19.
If the increase in MSP is substantial, as the government has announced that it will ensure 50% returns over the cost of production, exporters think it could affect exports adversely.
Exporters claimed that international buyers come to India mainly because Indian cotton is discounted.
The reason is that India has had a bad reputation as Indian traders export inferior quality cotton, delay shipments, give false packaging, add moisture and cotton has some trash, industry insiders said .“If the government does increase MSP to C2 plus 50 percent cost of production, then exports may become difficult,” an executive of a multinational trade house said on condition of anonymity. The executive said if the Government implements the Bhavantar scheme – where the government pays farmers the difference between MSP and prevailing market prices – after increasing MSP, then the trade will remain competitive in the export market.
