China and Bangladesh Look at US after India Cotton Ban

The US has become the most sought after location for cotton following India barred last week its cotton shipments in an effort to curb soaring domestic prices. The sudden halt of exports of Indian cotton has put pressure on yarn spinning industries of China, Bangladesh and Pakistan to look for other cotton destinations to meet their demands.

According to sources, the US cotton industry, the largest producer is experiencing unexpected orders from China and Bangladesh. This new development at the cotton front has also pushed up demand for West African cotton. If the ban sustains for a longer period it may even help Australia and Brazil to chip in to the demands of the Asian buyers.

The global prices of cotton also witnessed sudden rise soon after the announcement of India’s ban on its cotton exports, a decision made to mitigate domestic yarn spinners’ woes. China, Bangladesh and Pakistan rely on India particularly due to low prices and inexpensive procurement overheads.

China is the largest importer of cotton, and its imports are estimated at 9.5mn bales per annum. Furthermore, China’s cotton demand is mainly met through the supplies from Indian cotton growers. Until India takes a review on the ban in favor of exports, which it does based on periodical production status; China along with other countries will have to procure cotton for higher prices.

But the Cotton Association of India fears that the ban may damage the reputation of India as an authentic source for cotton procurement in the future. Moreover, it is not clear how India’s cotton shipments would double to some 8mn bales by September this year as last month forecast by India's Cotton Advisory Board (CAB).

Some figures show the US, Brazil and Pakistan have no surplus cotton, while China’s cotton acreage has dipped 10 percent this year. As per CAB, India has estimated cotton crop close to 30mn bales for 2009-10.

By Jose Roy