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Pakistani imports help cut India's cotton surplus
02
Dec '15
After floods cut Pakistan's cotton crop to the smallest yield in over a decade, the country is buying more cotton than expected from India, thereby opening an opportunity for the world's biggest producer to offload its massive stockpiles, according to an agency report.

India has struggled to find buyers over the past year after the world's top cotton consumer China cut import quotas to stimulate demand for its own fibre. The problem has been further exacerbated by near record high Indian output.

But the recent flurry of purchases by Pakistan has pushed up cotton prices in India to more than the Minimum Support Price (MSP) in most regions, reducing the pressure on the Government to buy from distressed farmers.

India has contracted to export 2 million bales in the marketing year that started on October 1, with Pakistan buying half of that. Typically, China would account for more than 50 per cent of India's shipments.

"We were not expecting such kind of demand from Pakistan," Cotton Association of India President Dhiren Sheth said. "Pakistan could buy another 500,000 to 700,000 bales."

According to industry sources, total cotton imports by Pakistan will more than triple this marketing year, with India cornering a major share given lower transportation costs.

"Due to lower freight, India is the first choice for buyers in Pakistan," said Shahzad Ali Khan, chairman of Pakistan Cotton Ginner's Association.

India has signed to export cotton to Pakistan for 63-66 US cents per lb, mainly through the Wagah land border in Punjab. More exports by India could put a lid on US cotton prices that have rallied on worries that rain in some producing areas of the US will hit output.

Pakistan's overall cotton imports are seen climbing to at least 4 million bales in the year that started on August 1, from 1.2 million bales a year ago, said Saleem Saleh, acting secretary general of All Pakistan Textile Mills Association.

Its cotton output is expected to drop 25 per cent to 11.4 million bales in 2015, the lowest since 2003, he added.

As Pakistan turns to India to fill this shortfall, stocks in the top producer are expected to come down, cutting the need for state purchases.

India spent Rs 160 billion rupees ($2.41 billion) to buy 8.7 million bales of cotton for farmers in the year that ended on September 30 after China trimmed purchases.

"This year procurement will be much less," said B.K. Mishra, chairman and managing director of the state-run Cotton Corporation of India, estimating government purchases of just 2-3 million bales. (SH)

Fibre2Fashion News Desk – India

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