Big cotton crop to boost exports

Cotton exports in 2004-05 (October-September) season are expected to cross one million bales, in view of the bumper crop and continuing slide in domestic prices, industry and government officials said Thursday.

"Exports have become workable after the decline in local prices, and have already started in a small way. We expect the exports to pick up in the coming days," Mumbai-based cotton analyst Dinesh Hegde said.

The Cotton Advisory Board has estimated the country's exports in the 2004-05 season at 1.2 million bales, marginally lower than last year.

But traders estimate that exports were closer to 0.8 million bales last year and will touch one million bales this time around.

India's exports this year will be around a million bales, but bulk of the trade will be done from March onwards, said Bhavik Mehta of Soham Cotton Trading.

He said in the next few months domestic prices are expected to soften further or possibly global rates may go up. Either way, it will be conducive for exports. From March onwards, exports will pick momentum.

The Cotton Advisory Board has estimated the closing stock of cotton at 3.4 million bales on Sep. 30, 2005 against 2.1 million bales on the same day this year.

No one has the capacity to handle such huge capacities and exports are bound to take place, Mehta said.

In the current scenario, when the output is expected to touch a record high of 21.3 million bales this season, up from 17.7 million bales in the year-earlier period, exporting the surplus is a viable option, Agriculture Commissioner C.D. Mayee said.

He said total exports could even touch 1.5 million bales as Indian cotton was quite competitive in the world market.

"At present there is a parity with world prices but if need be we can subsidise exports in future to ensure domestic prices of various grades of cotton do not slip below the minimum support price fixed by the government," he said.

He said there was good demand for Indian cotton in Bangladesh, which could be tapped.

Traders said bulk of the exports will be to the south-east Asian countries and west Africa. With good quality Shankar-6 and Mech-4 varieties quoting at 16,500-17,500 rupees per candy (1 candy=0.3556 tonne) in the domestic market, Indian cotton is being offered by exporters at 48-49 cents per pound.

Some traders are also taking position for March and accordingly selling at even lower rates.

"It is difficult to estimate at this juncture but around 20,000 bales may have been contracted for export in the last two months," a trader said.

He said December New York futures are at 48.4 cents a pound and March is lower at 42.9 cents. Indian prices are falling but the trend is the same in the world market, rendering exports tougher if not unviable, he pointed out.

A cotton ginner from Indore said buying enquiries have begun to pour in and a few traders are scheduled to meet their counterparts abroad on Nov. 28 in Ahmedabad to explore export opportunities.

Earlier, CRISIL MarketWire had reported that the textile ministry had mooted a proposal for exporting cotton to Pakistan.