KOLKATA, India, Aug. 15 (Xinhua) — For the first time in three years cotton prices in India, which is the world’s second largest supplier, have risen past global levels, triggering a scramble for the fiber from overseas, as record shipments and lower-than- expected arrivals of the commodity have depleted local stocks.
Domestic cotton prices are about 88 cents per pound, freight on board, around 14 percent higher than the African fiber and 10 percent more than the crop in the United States, the world’s largest cotton exporter.
The U.S. cotton futures for the December delivery settled at 72. 43 cents a pound a fortnight ago, reflecting a moderation in global prices.
The U.S. cotton futures have crashed 67 percent from an all- time-high of 2.197 U.S. dollars a pound in March last year as production went up while demand from textile mills fell last year. Cotton is one of the 24 commodities tracked by the Standard & Poor ‘s GSCI Spot Index.
In a stark contrast, Indian cotton prices are expected to rise even further in the coming days as poor monsoon rains have raised fears of a fall in output in the year starting October 1.
The Saurashtra and Kutch regions of India’s western state of Gujarat, the country’s largest producer of cotton, have 72 percent less rainfall than expected by this time, while parts of another western state of Maharashtra, the second-largest producing state, have also experienced dry spells.
India’s Agriculture Secretary Ashish Bahuguna has said cotton output may be seriously affected if the two regions in Gujarat do not get enough rains by the end of this month, although the situation in Maharashtra was still better.
Cotton planting trailed the usual average by 7 percent at 8.37 million hectares since summer sowing started in June with the onset of seasonal rains.
Worried textile mills have already started importing huge volumes to prepare for a shortage in the domestic supply, a situation last witnessed before the introduction of the BT Cotton in India around ten years ago.
The country’s cotton imports are expected to hit a nine-year high of 1.5 million bales in 2011-12, a significant portion of imports expected to come from African countries, including Tanzania.
A senior trade official said that since high-grade cotton was exported last year and only poor quality Indian cotton are available at present, many mills were forced to step up imports.
Analysts here said that because of the unexpected weather pattern, the output projections for 2011-12 by the state-backed Cotton Advisory Board of 34.7 million bales and the agriculture ministry’s 35.2 million bales would be missed.
Although India usually buys some high-grade cotton varieties in small volumes from overseas, mainly from Egypt and the United States, this year mills are purchasing all varieties.
D. K. Nair, secretary-general of the Confederation of Indian Industry,said that the delay in monsoon rains would also mean in a delay in the sowing of cotton seeds.
“Below normal rains have the potential to adversely affect yield, and as of now, prospects of a good yield do not look good,” Nair said.
Another industry executive said if harvesting is delayed beyond the usual time, which is late September, domestic prices would skyrocket, as there would hardly be any stocks available in the Indian market.