India’s cotton exports to China may see a fivefold jump after China slapped additional duty on imports of the fiber from the US amid a trade standoff between the two economies. Indian traders have already entered into a forward contract with Chinese buyers to deliver about 1.2 million bales between November and January.

However, a likely decline in India’s cotton production in the next season, low closing stocks and higher minimum support prices might dent India’s export prospects. Thanks to the new minimum support price, cotton prices will rise by a whopping 28 per cent. Given the conversion ratio of around 33 per cent the prices of finished cotton will be up 20 per cent from current global prices. At this price, India’s cotton exports will be uncompetitive, though the rupee’s fall would cushion the fall a bit.

China’s cotton stocks have reduced and it has become a net importer to meet its garment demand. It has an annual output of 35 million bales against consumption of about 50 million bales. The country has not been able to increase cotton production in recent years since the focus shifted to food and feed crops. China’s buffer cotton stocks began depleting since 2015. India’s cotton output for the 2017-18 season is estimated as seven per cent higher from the previous year. Next season’s output is expected to be slightly less than this year’s.