fe Bureau New Delhi, Feb 13
INDIAN traders are eyeing fresh export deals after lying low since October as the global cotton crop in the year starting August is expected to drop to its lowest since 1993, likely driving up prices after rates have remained subdued for most part of the past one year.
India, the world’s second largest cotton supplier, exported a record 12.9 million bales in the domestic marketing year through September 2012 when global prices hit record levels as top user China ramped up purchases. However, global prices started crashing since late last year as China trimmed purchases due to an economic slowdown and swelling inventory, dropping below the domestic level. One bale equals 170 kg.
However, global cotton futures have been rising again since January on fears that production in the US, the world’s largest exporter, would drop just as demand returns in biggest consumer China. Although prices have dropped a tad in intraday trade on Wednesday to 82.61 cents per lb, mainly on profit booking, they are still up by more than 8% since January, which witnessed the sharpest monthly gain since February 2011. Prices of certain varieties are now marginally lower than global levels, and continued Chinese purchases would make Indian exports more attractive, two traders said on Wednesday.
Global prices tumbled by 66% until October last year since hitting an all-time-high of $2.197 an lb in March 2011, but fears of a drop in supply drove up prices, which are now 62% lower than the record level. The state-run Cotton Advisory Board (CAB) last month revised up export forecast for 2012-13 to 8 million bales from 7 million bales announced earlier, although skepticism about the shipment touching the revised projection level had loomed large. Around 2.7 million bales have already been shipped, said the traders.
A ministerial panel in November decided the exportable surplus of 7 million bales — as was determined by the CAB then—would be adehered to in the registration of shipment contracts during 2012-13. The panel comprised agriculture minister Sharad Pawar, finance minister P Chidambaram and textiles and commerce minister Anand Sharma.
The government would cap cotton export registration at 7 million bales in the current marketing year through September 2013, and may consider whether to allow more after the ceiling is breached. Cotton arrivals in the domestic market, however, has dropped 3% from a year before to 18.34 million bales until February 10 since the marketing year started in October. The country expects to produce 33 million bales in 2012-13, down 7% from a year earlier. (Source: Financial Express)