After rising by almost 19 per cent year-on-year in the fiscal year (FY) 2013-14, India's raw cotton exports are expected to decline sharply by almost 35 per cent in the current FY, mainly due to lower demand in China.
According to the USDA, India's cotton exports in the marketing year beginning August 2014 are forecast to decline to 1.3 million tonnes (around 6 million 480 lb bales), which is down about 34.8 per cent from an estimated 2 million tonnes (around 9.2 million 480 lb bales) exported in 2013-14.
India is the world's largest cotton producer (about 6.7 million tonnes) and the second largest exporter of cotton. India's cotton exports have grown in the last few years, in tandem with growth in China's imports.
However, the cotton stocking programme in China has resulted in record high stocks (of around 13 million tonnes compared to annual consumption of around 8 million tonnes) which the Chinese government plans to offload into the domestic market this year.
China's cotton imports are expected to decline to around 1.52 million tonnes (around 7 million 480 lb bales) in FY2014-15, which is less than half the 3 million tonnes (around 14 million 480 lb bales) imported in FY2013-14, and down about 71 per cent from a record 5.3 million tonnes (around 24.5 million 480 lb bales) imported in FY2011-12.
Consequently, India's cotton exports are now increasingly moving to other destinations such as Bangladesh and Pakistan which have emerged as the main export markets for Indian cotton exporters this year.
While forward contracts and a larger crop area is unlikely to adversely impact cotton production in India in FY2014-15, decline in exports is likely to push both prices and production down in the coming years.
According to official sources, average cotton prices in India have declined by around 10 per cent year-on-year in this October and cotton farmers are increasingly turning to the Cotton Corporation of India (CCI) to sell their produce at the minimum support price (MSP) of around Rs.4,050 per quintal. Millers expect prices to decline further as cotton arrivals usually peak in October - November.
International cotton prices are also likely to remain low. The International Cotton Advisory Committee (ICAC) says, "Given the predicted 1.8 million tonnes of surplus cotton production and changes in China's cotton policy, prices are unlikely to rise to the levels seen in the last two seasons. -The Dollar Business