The crash in cotton prices in India has encouraged exporters start to look for contracts for future shipments. A bumper crop has been estimated this year, 35.1 million bales, up 3.8 per cent from the previous year. The benchmark Shankar-6 variety has fallen 19 per cent in a month. During this period, the benchmark Number 2 cotton futures for near-month delivery on the InterContinental Exchange rose a marginal 0.1 per cent. This makes exports viable.
Exporters are waiting for a further fall in local prices before they initiate the signing of contracts with traders for assured supply and deal with foreign buyers. However, a sharp decline in India’s cotton exports is expected during 2016-17 (October this year to next September). That is because Pakistan, which took nearly 40 per cent of 2015-16 exports, has had a bumper crop. Last year, exports to Pakistan not only compensated the decline to China but helped increase the overall shipment. The crop in Pakistan was very bad due to a pest attack. This year, however, no such attack was reported.
Though markets in Bangladesh and Vietnam could be explored, it’s doubtful how far the decline in export will be halted.