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India Prohibits Exporting Cotton: It Is Not Expected To Cause Big Fluctuations In Cotton Prices This Year.

2012/3/9 15:12:00 29

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March 5th

India foreign trade

When the chief executive issued a statement prohibiting the export of cotton, the international cotton price rose.

In view of the impact of the policy on cotton price trend and textile enterprises in China, we collected some information and consulted experts in the industry.

Policy motivation: the import price of cotton from India is lower than domestic price, which leads to the import volume exceeding the expectation of India, and this policy is out of order to protect domestic demand.

In the context of 2011/2012's weak global demand and oversupply of cotton, domestic and foreign cotton prices are all down. Under the influence of domestic purchasing and storage policy, domestic cotton prices have a premium of 1000-2000 or 2000 over that of the US and India respectively. Therefore, textile enterprises have increased the intensity of importing cotton from India. According to the data, India has exported 8 million 500 thousand packages (170 kilograms per pack) of cotton, which is higher than the 8 million 400 thousand package estimated by India government, and only 10 million packages of export contracts have been signed.

The massive export of cotton in India has caused the local textile association to worry about the future cotton sources of the textile enterprises, thus putting pressure on the government to produce the policy.

The impact of policy on cotton prices:

India

Cotton exports in 2011/2012 have basically settled, and the policy is not expected to cause big fluctuations in cotton prices this year. The main impact of the policy will be on global cotton supply next year.

India has exported about 1 million 500 thousand tonnes of cotton, which has achieved most of its exports in the past years, so it will not have much impact on the supply of global cotton in 2011/2012.

We expect this policy to stimulate cotton prices in the near future, but cotton prices are hard to rise sharply this year, judging by the global cotton supply exceeding demand and the continued weakness of downstream demand.

In the past two years, India's cotton export volume is about 1/6 of the global export volume. It is the second largest exporter of cotton in the world. If its export policy is extended to the second half of the year, it may have a certain impact on 2012/2013 global cotton supply.

The impact of policy on the downstream: textile enterprises are trapped upstream and downstream, and the situation is worrying.

In January 2012, the export volume of China's textile and clothing decreased by 0.42% compared with the same period last year. On the other hand, domestic cotton prices were strong because of the market support policy, which raised the production cost of domestic textile enterprises.

The India policy will more or less have a stimulating effect on cotton prices, which is bad for textile enterprises with passive replenishment under weak demand.

Future policy direction:

Cotton in India

Policy history is repeated. Therefore, the sustainability of policy depends on the interests of the Ministry of agriculture and the Ministry of textiles.

The implementation of the policy of banning cotton exports was not the first time in India. It was also implemented in March 2010. It was abolished in August of the same year. The main reason for the repeated policy lies in the interest game between the Ministry of agriculture and the Ministry of textiles.

In view of the fact that the basic dust of India's cotton exports has been settled this year, we remain on the sidelines for the time being.