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Sharp fall in cotton forward contracts in Gujarat

Sep 11, 2017
Sharp fall in cotton forward contracts in Gujarat

Gujarat is witnessing a sharp decline in forward contract of cotton for export in the new season. Gujarat, which accounts for about 25-30 per cent share in India’s total exports, is witnessing less activity in new forward cotton contracts on account of hesitation by exporters who have had bad experiences in past few years and have faced losses due to advance commitment of cotton buying.

According to sources, India has exported about six million bales of cotton so far during cotton year 2016-17 and of it nearly 30 per cent exports have been from Gujarat alone. “Usually a month before the new season, exporters commit advance orders with the ginners and cotton suppliers for exports in November and December. However, in view of unfavourable experiences in recent years , exporters are not taking risks in forward contracts resulting in virtually no forward contracts this year,” says an Ahmedabad-based cotton source.

In addition to this, the industry is also expecting huge production in the current year. Good monsoon has increased cotton sowing by almost 18 per cent nationally and 10.50 per cent in Gujarat. Higher sowing has brightened the expectation of better production.

According to the latest data, as on September 1 area under cotton has increased to 11.98 million hectares as against 10.17 million hectares in corresponding period last year. Gujarat which is leading cotton producing state has sown cotton on 2.63 million hectares as on September 4, as against 2.38 million hectares in corresponding period of 2016.

The International Cotton Advisory Committee (ICAC) in its recent global stock position stated that cotton production in the US is forecast to increase by 20 per cent to 4.5 million tonne. India will remain the world’s largest cotton producer in 2017-18 with 4 per cent increase in output at 6 million tonne.