Cotton in India could see a disconnect from global prices in response to the relatively tight balance sheet this season. But the upside will be limited due to negative global cues. China has once again emerged as a game changer for cotton as it has for other commodities. Cotton prices in China have fallen sharply. Indications are that China, the largest importer of cotton till 2014-15, could potentially re-emerge as an exporter.

The last time China emerged as a major exporter was in the 1999-2000 season when it exported close to 24 lakh bales. India opened the new season with a record opening stock of around 77 lakh bales. It’s this extreme supply heaviness that has resulted in cotton prices dipping below the minimum support prices in many regions.

China is now bound by mandatory imports of close to 53 lakh bales of cotton under the WTO. And stocks with China are much higher than before. In this backdrop, the global cotton crop could rebound in the next season as the weather turns normal world over and the alternate crops look even less attractive. Clearly, cotton price woes are far from over.

In the last three months, India consumed close to 76 lakh bales, exported around nine lakh bales and imported five lakh bales.