Cotton buyers flock to India as hurricanes hit US crop hard
MUMBAI: The world’s top cotton buyers, all in Asia, are flocking to India to secure supplies after fierce storms in the United States, the biggest exporter of the fibre, affected the size and quality of the crop, dealers said.
In the past week alone, India, the world’s second-biggest cotton exporter, sealed deals to sell about a million bales to China, Taiwan, Vietnam, Pakistan, Bangladesh and Indonesia – key garment suppliers to brands such as H&M, Inditex-owned Zara and Wal-Mart Stores Inc.
That compared with 300,000 bales in the 2 weeks before. Dealers expect contracts similar to last week in the next few months, which could help exports grow by a quarter in the 2017-18 season beginning October.
“Indian cotton has great chances this year,” said Chirag Patel, chief executive at Jaydeep Cotton Fibers, a leading exporter. Asian “buyers are switching to Indian cotton from the US.”
Hurricanes Harvey and Irma caused widespread damage to crop in Texas and Georgia, major cotton producing states, with the effects more widespread in Texas, dealers said. “We definitely lost cotton in Texas. It wiped out 500,000-600,000 bales,” said Peter Egli, risk manager at Plexus Cotton, a Chicagobased merchant, referring to the impact of Harvey in the top-producing US state.
In 2016, the US exported 86 per cent of its cotton, 69 per cent of which went to Asia, according to USDA. Other cotton producers like Brazil and Australia could benefit from lower supplies from the US, but may find it difficult to match the price offered by India, where a bumper harvest is likely to keep the rates lower.
Traders in India, also the world’s biggest cotton producer, signed their export deals at around 80 cents per lb on a cost and freight basis, nearly 2 cents lower than the supplies from the US, dealers said. India could soon sell at lower prices. Farmers are likely to harvest record 40 million bales of cotton in the 2017-18 season beginning October 1, 2017, bringing domestic prices down and making exports even more competitive, Patel said.
For the 2017-18 season, farmers have planted 12.1 million hectares with cotton, up 19 per cent from a year earlier, farm ministry data showed.
India harvested 34.5 million bales of cotton in the 2016-17 season. Favourable crop conditions would help India sell 7.5 million bales of cotton on the world market in 2017-18 against 6 million bales in the previous year, said Nayan Mirani, partner at Khimji Visram & Sons, a leading cotton exporter.
Some traders believe India’s exports could surpass 8 million bales if China, the biggest cotton consumer, steps up imports in 2017-18.