Cotton exports dwindle due to high prices in May
Cotton exports volume dwindled to just 1.6 lakh bales (170 kg each) in May as against 7.7 lakh bales exported in the same month of previous marketing year (2017-18) and 2.40 lakh bales in April this year. Shipment in US$ term declined by 77% YoY. One of the important factors for a reduced export is pricing. Cotton exports in May fetched an average price of INR132.65 per kg or US cents 87.08 per pound. This was the highest level since the start of 2018-19 marketing season (Oct-Sep). The month also marks the end of peak export season, as volumes will continue to fall and remain sluggish until the arrival of new crop.
The cumulative shipment during the period October 2018 to May 2019 was 5.12 lakh bales worth US$1,570 million or INR11,050 crore. This was 32% lower than the shipment in the same period of previous season, when the total shipment had reached 7.44 lakh bales.
Prices in both spot and export markets were largely influenced by global trend where prices had peaked in April. Although there was dip in global and spot prices in May, export prices continue to march higher, resulting in a significant drop in shipment during the month. The global spot benchmark Cotlook A index had averaged US cents 87.39 per pound in April but fell to US cents 80.37 per pound. The comparative prices of Shankar-6 in the spot market were US cents 84.70 per pound in April which fell to US cents 82.87 per pound in May.
Also the low cotton production estimates were at play on the export market. The CAI pegged production at 315 lakh bales in its latest forecast for 2018-19 season as against 365 lakh bales in the previous season. Total supply from October 2018 to May 2019 was 325 lakh bales of 170 kg each including arrivals of 287.72 lakh bales up to May 31, imports of 9.28 lakh bales and the opening stocks of 28 lakh bales for the season.
In May 2019, Bangladesh was the largest destination for Indian cotton, followed by Iran and Pakistan. China was the fourth largest market during the month, followed by Vietnam.
