Cotton Report:  March 14, 2003

Exports to India could increase soon

Earlier this week, rumors began to circulate that the Cotton Corporation of India (CCI) would soon be authorized to import large amounts of cotton in order to bring down rising cotton prices.  Yesterday, news broke that the Indian Textile Ministry has given the CCI permission to import the equivalent of 781,000 bales (480-lb) between now and September 2003.  The CCI is the agency through which the Indian government intervenes in the cotton market to balance producer and textile interests:  When market prices fall below the Minimum Support Price, CCI purchases at the support price and losses are reimbursed by the government; when tight domestic supplies and high prices threaten competitiveness of the Indian textile industry, the CCI can make more cotton available.  The CCI has not carried out any major imports in over a decade. 

source: World Trade Atlas

India’s MY 2002/03 cotton crop was down 10 percent from last year, while consumption is expected to increase 2 percent.  Under such circumstances, it would seem that India’s import demand would grow from last MY’s 1.75 million bales.  Indeed, USDA’s August 2002 forecast for Indian MY 2002/03 imports was 2.4 million bales. Since that time, the production outlook improved and evidence of import demand failed to materialize.  Many Indian mills ventured into the international marketplace for the first time last year to take advantage of historically low cotton prices, especially of U.S. growths.  Sometimes, inexperience led to disappointments with quality, which led to defaults and an aversion to imports in the current MY.  Imports by CCI could help some mills avoid such problems. 

 How much will the newly announced government import demand benefit the United States?   Comparing the first three months of MY 2002/03 with the same period last MY, a change in preferences is noticeable.  Imports from the U.S.

as a percent of all imports fell from 40 percent to 20 percent.  This is comparable to MY 2000/01 total import market share and could suggest that last year was an outlier. Australia, which accounted for 13 percent of India’s Aug-Oct imports in 2001, fell to 2 percent. Imports were less concentrated than during the same period a year earlier, as the top six suppliers accounted for 64 percent of imports in Aug-Oct 2002, versus 77 percent in Aug-Oct 2001.  The preference appears to have shifted to Sub-Saharan African suppliers, who account for 55 percent of Aug-Oct imports in 2002, up from only 15 percent during the same period a year earlier.