Cotton exports fall as traders charge high premiums

Cotton exports fall as traders charge high premiums

Mumbai, Maharashtra

Cotton exports have begun to slide due to traders charging hefty premiums over benchmark US futures on expectations of lower output at a time when there is strong demand from local textile mills, industry officials said.

The higher premiums sought by India, the world’s biggest cotton producer, could force Asian buyers such as Bangladesh, Vietnam and China to increase purchases from other suppliers such as the United States, Brazil, Australia and African nations.

Vinay Kotak, director at Mumbai-based Kotak Ginning and Pressing Industries told that, exports are nonviable and they are selling a small amount to Bangladesh, but other buyers are not purchasing.

Cotton is being offered at around 135 cents per lb, cost and freight-basis, to buyers in Bangladesh for January and February shipment, nearly 20 cents over US futures, dealers with global trading firms said. Usually, India charges a premium of 5 to 10 cents/lb over US futures. Record domestic prices could stifle exports in the 2021-22 marketing year ending on September 30, Kotak said.

A few buyers from Bangladesh are paying higher prices for Indian cotton as they need prompt shipments and want assurance of delivery, said a Mumbai-based dealer with a global trading firm.

India’s cotton production could fall to 34 million bales in 2021-22 marketing year, down nearly 4% from a year ago as crops in key producing states were damaged by rains during the harvesting season, Kotak said.

Textile mills are keen to import cotton, but overseas buying is hindered by a 10% import tax that New Delhi imposed last year, said Kotak. Imports would land in bulk if government removes the import duty, Kotak said.

Source: The Times Of India

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