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Gujarat forward contracts of cotton decline

Gujarat is witnessing a sharp decline in forward contract of cotton for export in the new season. This is because exporters have had bad experiences in the past few years and faced losses due to advance commitment of cotton buying. Gujarat, a leading cotton producing state has sown cotton on 2.63 million hectares as on September 4 as against 2.38 million hectares in the corresponding period of 2016. Gujarat accounts for a 25 to 30 per cent share in India’s cotton exports.

Usually a month before the new season, exporters commit advance orders with ginners and cotton suppliers for exports in November and December. However, in view of unfavorable experiences in recent years, exporters are not taking risks in forward contracts resulting in virtually no forward contracts this year.

Good monsoon has increased cotton sowing by almost 18 per cent nationally and 10.50 per cent in Gujarat. Higher sowing has brightened the expectation of better production. India will remain the world’s largest cotton producer in 2017-18 with a four per cent increase in output. The country has exported six million bales of cotton so far during cotton year 2016-17. Cotton production in the US is forecast to increase by 20 per cent.