Drought in India leads to high export prices of cotton

India’s cotton exports have been stagnant, and the country’s domestic cotton supply has tightened due to drought, pushing up cotton prices and forcing traditional importers such as Bangladesh, Pakistan and Vietnam to switch to other countries’ supplies.

The stagnation of Indian cotton exports will help boost exports from Brazil, Australia and the United States, and push the international cotton price to its highest level since August.

The rise in cotton prices will push up the prices of fibers and fabrics and curb the profits of apparel manufacturers.

Chirag Patel, chief executive of cotton exporter Jaydeep Cotton Fibers Pvt. Ltd, said: "In the past three to four weeks, Indian exporters could not sign contracts. Our cotton is more expensive than Brazil and Australia."

He said that for Pakistani and Bangladeshi buyers, the CIF for Indian cotton is 75-76 cents per pound, while the price for Brazilian cotton is about 73 cents per pound.

Due to lower freight rates, Pakistan and Bangladesh prefer Indian cotton.

India's domestic spot cotton prices rose by 10% from a month ago to 73.5 cents per pound. Production was reduced due to continuous drought and cotton supply was limited.

The Indian Cotton Association (CAI) expects India's 2015/16 (starting on October 1st) output to be approximately 34.1 million bales (170 kg per bale), down from 38.3 million bales in the previous year.

According to CAI**Dhiren Sheth, India's exports of cotton so far in 2015/16 are about 6.5 million bales, and Bangladesh and Pakistan have taken over half of them. India exported 6 million bales of cotton in 2014/15.

Patel said that although cotton textile companies increased their purchases, the supply of cotton in the cash market continued to decline.

During October-April, the supply of cotton in the Indian spot market decreased by 12.5% ​​from the same period of last year.

A trader from a multinational trading company said: "The industry has not been able to determine the impact of drought on production. Production is lower than originally estimated."

"Now textile companies are making big purchases to ensure that inventory is sufficient for the next four months."

A trader said that the new crop of cotton usually begins to enter the market at the end of September, but this year's supply may not arrive until mid-October. Due to the late rain season, the planting of major production areas has been postponed.