Cotton market becoming less ready for Indian, US exports
TOKYO - International cotton prices are likely to rise due to predictions of a weak cotton crop in India, the world's second-biggest producer, which has pushed the country to the brink of becoming a net importer.
The price touched 87.98 cents on May 19, the highest level in nearly four years after the US Department of Agriculture downgraded its export forecast for India last week.
The USDA estimates that India will export 1.4 million bales of cotton for the 2022-23 year ending this July - 22% lower than the previous estimate made in April and less than half of last year's 3.74 million bales.
Bad weather is believed to be damaging India's cotton crop in Telangana, Maharashtra and other states. Cotton Association of India has reduced its production estimate.
Cotton market watchers expect India to boost imports, partly thanks to a tariff-reduction deal with Australia. The USDA estimates that India is on track to import 1.75 million bales in 2022-23.
India has benefited from more open western markets for textiles from developing countries since the mid-2000s, but it may again become a net importer of cotton for the first time since 2004-05.
A source in a trading company said, "The reduced supply from a major exporter like India will shift demand to other cotton-producing countries, putting pressure on global supply and demand."
According to USDA projects, the world's largest cotton exporter, the U.S. Exports by, will fall 14% in 2022-23. The state of Texas, which accounts for 40% or more of US cotton production, is dealing with a drought.
Exports from Brazil, another big cotton producer, are projected by the USDA to fall 11%.
This leaves little capacity to fill the hole left by the decline in Indian exports. Meanwhile the demand for cotton is increasing. The USDA expects global cotton use to grow 6% more than production for 2023-24.
Apparel demand is on the rise with the economic recovery from the "COVID" pandemic, especially in Asia, and usage in Turkey and Pakistan, which are major consumers, will bounce back next year after a decline stemming from natural disasters.
