Cotton Exports to Miss Target; Quality Crop Earns a Premium.

AHMEDABAD: Unseasonal rains in Gujarat and Maharashtra are changing all calculations in cotton trade. Exporters who rushed to book export contracts for 55 lakh bales, a maximum limit set by the government, assuming a bumper cotton crop are now finding it difficult to meet their export obligations.

With a fall in quality stock arrivals in Gujarat, Maharashtra and Andhra Pradesh markets, trade sources don’t see a 100% of fulfillment of shipments by December 15 deadline. As a result, there is a Rs 3,000 premium on top grade Gujarat cotton. So far, only 15 lakh bales have been delivered and a major portion of 40 lakh bales is yet to be shipped.

“Due to unseasonal rains, arrivals have been low, creating a shortage of quality stock,” said Tushar Sheth of Cotton Trade India, an Ahmedabad-based cotton portal. “Exporters are in a soup. They have contracted Gujarat-based varieties like Shankar 6 and are forced to pay a premium as prices in state are ruling higher than those in states like Maharashtra,” he added.

Currently, buyers are paying roughly Rs 3,000 premium per bale (170 kg) for the required quality. Shanker-6 variety has been witnessing high demand from the international yarn producers due to its good mic, staple length as well as strength. Besides, a sophisticated ginning industry in Gujarat supplies goods with a very low contamination. Cotton processed in Gujarat contains 1.5-2% of impurities  much lower than the trash content of 3-3.5% elsewhere.

On Thursday, exporters bought cotton at a rate of Rs 44,200-44,500 while Maharashtra rate was lower at Rs 42,500-42,800. Prices made their high of Rs 47,000 during the last week when international market touched its all-time high level. December delivery future at ICE touched a level of 155 cents per lb last week. “There is all chance that exporters would not be able to deliver committed goods as arrivals are low.

Currently, their requirement is one lakh bales per day and arrivals are just half of that,” said Mr Sheth. Arrivals in Gujarat have dropped to just 25,000 bales from the 65,000 bales a week ago. Majority of market yards also closed down their activity till next Sunday. Only three yards  Jasdan, Amreli and Vankaner  were open on Thursday.

Elsewhere in the country, the arrivals decreased to 1.4 lakh bales from the 2.5 lakh bales last week. “Rain has stopped now and arrivals may return to the normal levels. But quality will be an issue,” said a Rajkot-based ginner. Askash Chapdiya, MD of Rajkot-based Fem Cotton, said, “I don’t see shipment above 32-35 lakh bales by December 15 as ginners are not able to produce quality stocks.

The current arrivals are containing higher moisture levels and so ginners don’t get the required output.” Normally, cotton contains 8-9% moisture but new arrivals contain 13-14% of moisture. “Cotton crop has seen big damage during the last week. Standing crop’s colour also turned yellow,” said BK Kikani, former vice-chancellor of Junagarh Agriculture University.

Source : economictimes.indiatimes.com