Due to tight supplies during the drought, cotton exports from India, the world’s biggest producer, have nearly halted as local prices have rallied, forcing key importers like Bangladesh, Pakistan and Vietnam to turn to other suppliers.
The freeze in Indian export will prompt Brazil, Australia and United States to raise shipments and has pushed global prices to near their highest since August. The price rise could subsequently push up fabric and clothing prices and put pressure on the margins of garment makers. In last three-four weeks Indian exporters could not sign a deal.
Meanwhile, the landed cost of Indian cotton for buyers in Pakistan and Bangladesh is at 75 cents to 76 cents per lb compared to around 73 cents for Brazilian cotton. Pakistan and Bangladesh prefer Indian cotton due to lower freight charges. Local cotton spot market prices have surged 10 per cent from a month ago to Rs 38,400 per candy of 356 kg (73.5 cents per lb) due to limited supplies after consecutive droughts cut production. A candy is equivalent to about two Indian bales of 170 kg each.
According to Cotton Association of India, India may produce about 34.1 million bales of cotton in the 2015/16 season that started on October 1, down from last year’s output of 38.3 million. India has exported around 6.5 million bales of cotton so far during the 2015/16 season, with Bangladesh and Pakistan accounting for more than half of the total exports. In 2014/15 India exported 6 million bales.