Cotton exports to slow by mid-December: USDA

NEW DELHI: India's cotton exports are expected to slow by mid-December on demand uncertainty in major consuming countries, especially China, according to the latest report of the US Department of Agriculture ( USDA).

The country's export forecast has also been revised downward by 5,00,000 bales to 7.5 million bales of 170 kg each for the 2011-12 season (October-September), it added.

The USDA, however, kept unchanged the cotton production forecast for India at 35 million bales for the current season.

According to the USDA, India's "export registrations may slow around mid-December as exporters await greater clarity about tariff levels and interest from China".

There is a degree of uncertainty to India's export prospects because there could be an increase in tariffs in China from January 1, 2012, and there is no surety about China's buying plans, it said.

So far, India's export registrations have reportedly touched two million tonnes on purchases from China and Bangladesh, it added.

In the 2010-11 season, the country is estimated to have exported around six million bales of cotton.

The USDA report also said Indian's cotton is selling at a discount from other origins in the wake of devaluation of rupee by nearly 20 per cent against dollar over the past few months from Rs 44 to Rs 52 per dollar.

However, it observed that despite the anticipated record crop, cotton arrivals continue to lag behind the 2010-11 pace due to the late onset of harvest and presumed holding of cotton by farmers hoping for higher market and support prices, it said.

Indian cotton is reported to be the lowest-priced cotton among major exporters, but current prices for seed cotton are trading at Rs 40-42 per kg, above minimum support price (MSP) levels of Rs 31-32 per kg, it added.

Stating that some farm groups have suggested that the MSP should be increased, the report said, "While an increase in the MSP seems unlikely, if implemented, an increase above a farm price that equates to a competitive export price could dramatically change the current export situation in India."

Cotton prices have dropped in recent days, suggesting that the pace of arrivals is beginning to accelerate, USDA observed.

On domestic demand, the USDA said demand from the local textile sector remains weak as mills are covering only their immediate needs in the face of large yarn stocks and weak export demand.