India’s cotton exports are expected to fall sharply in 2022-2023, matching imports in top producers for the first time in about two decades, in part due to low domestic inventories, the United States Department of Agriculture (USDA) said.
In its April Global Agricultural Supply and Demand report released on Tuesday, the USDA forecast Indian exports would fall by 500,000 bales to 1.8 million in 2022-23, roughly in line with its import forecast.
“Reduced domestic supply, increased demand for overseas long and extra-long staple grades, and the Australia-India Economic Cooperation and Trade Agreement (ECTA) have all supported this recent momentum,” the USDA said.
The Cotton Association of India (CAI) said in March that Indian stockpiles could fall to a nearly two-decade low in 2022-23 as adverse weather conditions squeezed crop yields.
“The Indian crop volume is far lower than originally estimated. The country will produce a very small surplus. Therefore local prices are fixed and there is no parity for exports,” said a Mumbai-based trader with a global trading house.
“In the coming months, deliveries would continue to fall. Exports will only pick up momentum when the new seasonal harvest starts in October.”
Although India was forecast to be the world’s third largest exporter, which was estimated at about 1.8 million bales in 2022-23, that was still well below the 6.2 million in 2021-22, the USDA said .
“Lower production could tighten the global balance sheet and create global opportunities and challenges,” said Bailey Thom, Cotton Risk Management Associate at StoneX Group.
“If India increases imports and we see higher demand, ICE cotton prices could rise. But demand has been slow due to economic conditions.”
Global benchmark cotton futures prices in the US are on track for a third straight monthly decline and are down over 1% so far this year on demand concerns.
The CAI had said lower Indian production could allow competitors like the US, Brazil and Australia to increase cargoes for key Asian buyers like China and Pakistan, while pushing up local and global prices.