Note ban takes away Pakistan cotton export relief cushion

While Pakistan recently lifted the ban on cotton imports from India, Indian exporters are unable to capitalise on the move. Last year, of the initial three million bales (one bale is 170 kg) of export orders during the October-December period, 1.5 million bales were to Pakistan. With daily arrivals still under pressure, exporters are unable to take orders.

Pakistan had banned import from India in the fourth week of November, citing quality issues. The ban was lifted a few days ago as industry urged the Pakistan government to do so.

According to the Indian cotton industry, Pakistan might import 700,000-800,000 bales in 2016-17. Last year, India had exported 2.5 million bales to Pakistan, which had faced a crop failure.

After demonetisation, several mandis are not fully operational as arrivals have dwindled. Cotton arrivals are down 25-30 per cent from last year, despite a slight improvement in early December.

Last December, daily arrivals had stood at 200,000 bales; this year, it is 140,000-150,000 bales a day. This month, arrivals increased by about 30,000 bales after farmers began accepting payments through cheque.

“While India is the best choice for Pakistan for cotton imports, Indian exporters are unable to profit from it. Demand is there from Pakistan and other countries but Indian exporters are not in a position to fulfil the demand. More, as supply is tight, exporters are not in a condition to fulfil their commitments they made for November and December. Exporters are not booking new contracts, as they are not sure about supply,” said Shirish Shah of Bhaidas Karsandas Company from Mumbai.

After the note ban, cotton prices had gone up to Rs 40,000 per candy of 355 kg, now ruling at Rs 38,800-39,200 per candy.

This year, India had booked export contracts of 2.2 million bales for October, November and December delivery but, the country had exported about 500,000 bales only by the end of November.

According to exporters, in this scenario, India’s total exports might decline by 20-25 per cent at the end of the year. Chirag Pan, CEO of Jaydeep Cotton Fibres, said, “India exports 70 per cent of cotton during October and March every year. The industry expects six million bales of cotton exports in the current cotton year (October-September) but in this scenario, exports might not be over 4.5 million bales.”

More, despite some amount of export demand, cotton ginners are unable to process much as they are not getting raw cotton from farmers.

Subodh Goenka of J S Cotton Industry from Akola, Maharashtra, said: “Generally at this time, ginning activity should be on in full swing but due to supply shortage and higher prices, ginning activity has been quite low.”

Raw cotton has been trading at Rs 990-1,060 per 20 kg in Gujarat, with prices going up by Rs 20 per 20 kg in December so far.