Cot­ton buy­ers flock to In­dia as hur­ri­canes hit US crop hard

Financial Chronicle - - PLAN, POLICY - RA­JEN­DRA JAD­HAV

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.

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