MUMBAI(Commoditiescontrol)- Pakistan’s import ban on Indian cotton may not have any major impact on Indian exports in 2016-17.
Pakistan has halted all agriculture produce import from India by stopping issuance of import permits for cotton since November 27. (Full Report)
The exact reason behind the ban is yet not known, however it is learnt to be the on-going cross border tension between the two neighbours.
In 2015-16 season, Pakistan had imported about 25 lakh bales of cotton from India and was expected to buy 15 lakh bales in 2016-17. Before the permit ban, 5 lakh bales were contract of which have already have reached its shores.
“Only those with letter of credit prior to the import ban will remain unaffected whereas others who have agreed thereafter will not be able to send their stock across the border”, said I J Dhuria, Director Materials, Vardhman Textiles.
“There was nothing to worry about as exports to other countries such as Brazil, Indonesia, China, Bangladesh will compensate for this loss. Estimates of around 55-60 lakh bales of cotton will surely be exported from India whereby Bangladesh will receive 20-25 lakh bales, 20 lakh bales to Vietnam and 5-8 lakh bales to China,” Dhuria added.
Currently, cotton price namely Shankar 6 was trading around Rs39,000-39,500 per candy (72.62-73.55 cents/lb) which is much cheaper compared to other major exporting countries. It is also much below the Cotlook Index A at 80.50 as on November 29. The KCA spot rate was ruling at US cents 72.46 per pound ex-gin in Karachi market. US Futures had closed US cents 71.30 per lb for March delivery.
Further, depreciating Rupee against greenback was advantageous for export. Rupee has plunged to an all time low of 68.87 on Thursday on strengthening dollar in the market and heavy sales from Foreign Institutional Investors (FII) and Foreign Portfolio Investors (FPI).
Rupee recouped somewhat by RBI's intervention and settled higher on November 29 at Rs 68.65 gaining 22 paise since November 25.
“Strong demand from exports is expected from January especially for cotton yarn and garments provided Rupee remain above 68 against US Dollar. We can expect cotton price to rally starting from January as demand from both domestic and international market will be in full swing,” said Arun Dalal, renowned cotton trader from Gujarat.
Demonetization has impacted the entire cotton value chain and recouping from the impact will take some time. November is a peak cotton season whereby the country receives full fledged supply, but due to liquidity crunch daily arrivals have fallen to a mere 1 lakh bales in the market.
(By Commoditiescontrol Bureau; +91-22-40015534)
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