As Hurricanes Hit U.S. Crop, Top Cotton Buyers Flock To India

After fierce storms in the United States, the biggest exporter of cotton, affected the size and quality of the crop, dealers in India said that the world’s top cotton buyers, all in Asia, are flocking to India to secure supplies.

Deals to sell about a million bales to China, Taiwan, Vietnam, Pakistan, Bangladesh and Indonesia were sealed by India, the world’s second-biggest cotton exporter, in the past week alone. These are the key garment suppliers to brands such as H&M, Inditex-owned Zara and Wal-Mart Stores Inc.

In comparison, in the two weeks before, 300,000 bales were sold.

India’s exports could grow by a quarter in the 2017/18 season beginning October, helped by and expected contracts similar to last week in the next few months.

“Indian cotton has great chances this year,” said Chirag Patel, chief executive at Jaydeep Cotton Fibers Pvt Ltd, a leading exporter. Asian “buyers are switching to Indian cotton from the U.S.”

With the effects more widespread in Texas, dealers said that hurricanes Harvey and Irma caused widespread damage to the crop in Texas and Georgia, major cotton producing states.

”We definitely lost cotton in Texas. It wiped out 500,000-600,000 bales,” said Peter Egli, risk manager at Plexus Cotton Ltd, a Chicago-based merchant, referring to the impact of Harvey in the top-producing U.S. state.

According to the U.S. Department of Agriculture, 69 percent of cotton exports from US went to Asia, as the country exported 86 percent of its cotton in 2016.

Other cotton producers like Brazil and Australia may find it difficult to match the price offered by India, where a bumper harvest is likely to keep the rates lower even though they could benefit from lower supplies from the United States.

Patel said that domestic prices could be brought down and exports would be made even more competitive as farmers are likely to harvest a record 40 million bales of cotton in the 2017/18 season beginning Oct. 1, 2017.

Farm ministry data showed that rising 19 percent from a year earlier, farmers have planted 12.1 million hectares with cotton for the new 2017/18 season.

India harvested 34.5 million bales of cotton in the 2016/17 season.

The daily auctions at the end of August has been planned to be stopped by Beijing, which began selling cotton from its reserves on March 6. But after local prices rose amid tighter supply, indicating the need to replenish falling inventories, it extended the sales for an additional month.

He had received a flurry of orders in the past few weeks, especially for December quarter shipments, a Mumbai-based dealer with a global trading firm company said.

India was struggling to sign export deals until a few weeks ago hobbled by the rising rupee and unattractive global prices. But sales were made more competitive by a recent rally in global prices made overseas.

Most Asian buyers were encouraged to turn to India due to close proximity apart from attractive prices. India can ship its cotton in two weeks to Vietnam, Bangladesh and Pakistan, while cargoes from the United States take about 50 days to reach there.

(Adapted from Reuters)


Categories: Economy & Finance, Geopolitics, Strategy, Sustainability, Uncategorized

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