India likely to reduce exports of cotton on reduced output

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SME Times News Bureau | 13 Dec, 2010
Owing to unseasonal rainfall in the main cotton producing regions, India, the world's second-biggest grower and exporter of cotton, may miss its earlier estimate.

According to D.K. Nair, secretary general of the Confederation of Indian Textiles Industry (CITI), output in the year started on October 1 may be 29.5 million to 30 million bales of 170 kilograms each, compared with 32.5 million bales estimated by the Cotton Advisory Board.

"There's a near-consensus that the crop will be below 30 million bales this year after the unseasonal rains and floods in some areas," Nair said. "A lower crop should prompt a review of the surplus availability and the export strategy."

A lower crop may prompt India to retain restrictions on exports, bolstering global prices that have rallied 72 percent this year. Cotton reached $1.5195 on November 10, the highest price since trading began 140 years ago, as adverse weather damaged crops in China, Pakistan and the US.

India's textiles ministry on October 11 halted registration of new export contracts after it got applications to ship 5.5 million bales, the maximum permissible this year. Louis Dreyfus Commodities, the top trader of cotton, and Cargill Inc. are among companies that won permits.

Meanwhile, there may not be more than 3 million bales available for export as rains last month in Gujarat, Maharashtra and Andhra Pradesh, the biggest growers, damaged crops, Nair said. Shipments may total 2.5 million bales, less than 5.24 million bales permitted by the Textiles Ministry for export by December 15, Nair said.

The South Asian nation, a major supplier of cotton to China, will cap shipments of yarn at 720,000 metric tons in the year started on October 1 to bolster domestic supplies, the government said last week.

"There has to be some predictability about government policy related to cotton," Nair said. "Any review of export policy should be based on actual crop size," he added.