MUMBAI (Reuters) - A sharp drop in cotton prices overseas and a weak monsoon have raised India’s imports in recent weeks, which could lift shipments more than 25 percent above the official forecast for this season ending September and help support cotton futures.
Cotton sowing in India, the world’s second-largest producer and exporter of the fibre, has been delayed this year due to erratic monsoon rains, raising concerns about production.
Mills in the coastal textile hubs of southern India buy cotton from Africa due to lower freight costs and are bringing in shiploads now as benchmark prices fell to a five-year low on Aug. 1 because of the prospect of ample global supply.
Worldwide inventories could swell to a record of nearly 106 million 480-lb bales by the end of the U.S. crop year ending July 2015, helped by a surge in output in the United States, according to the U.S. Department of Agriculture.
This is also depressing spot prices in some countries, with rates in Tanzania as much as 10 percent lower than the 86 cent per pound quoted in India.
“Imports of cotton mainly from West Africa have increased because their prices are much cheaper than India’s and the quality is also good,” said M.B. Lal, managing director of Shail Exports and former chairman of the Cotton Corp of India.
The pick-up in shipments could take India’s total imports for the season ending Sept. 30 to more than 1 million bales, traders said, above the forecast of 800,000 bales from the state-run Cotton Advisory Board on July 2.
However, imports will still be below last season’s 1.4 million as China is buying less yarn that uses cotton. India’s cotton output in 2013/14 is estimated to be 39 million bales.
“Imports in this season are going to be more than 1 million bales. West Africa and Tanzania are the most preferred destinations because availability is sufficient and quality is good,” said S. Dinakaran, joint managing director at Sambandam Spinning Mills in the southern state of Tamil Nadu.
A delay in the arrival of the new crop next season due to delayed sowing could also force Indian buyers to sign extended import contracts.
“Imports may rise (further) if new season supplies get delayed or prices increase in the absence of supply,” said Arun Kumar Dalal, a trader in the main cotton growing state of Gujarat.
More than half of India’s farmland relies on rainfall, with a heavy dependence on the June-September monsoon season.
This year’s monsoon had one of its slowest starts in a century but a late revival shrank the shortfall in rain to about 10 percent below average in July, a sharp improvement from the 43 percent deficit in the first month of the season.
Editing by Alan Raybould