The implementation of India’s cotton export restrictions may further aggravate global cotton tensions

Cotton: Extreme weather has hindered the planting of new cotton in India, and in the context of low inventories, if India’s export restrictions are implemented, it may provide a boost to international cotton prices

►The inventory of old printed cotton crops is low, and domestic cotton prices remain high. Unfavorable weather may hinder the progress of new season planting and affect production. In 2021/22, the cotton planting area in India has dropped significantly. At the same time, the increase in precipitation and the intensification of insect pests and other unfavorable factors have caused India’s cotton production to drop by 7.6 percentage points year-on-year to 25.5 million bales, driving inventory down by 33.5% to 7.94 million bales. Inventory consumption The ratio fell to a ten-year historical low. Against the background of tight supply and demand of Indian cotton, the spot price of Indian Shankar-6 has shifted significantly within a year. As the main cotton producing areas in northern India enter the new season planting time from mid-April to mid-May, the high temperature weather poses a challenge to the new season cotton. Under heat wave conditions, the evaporation of soil moisture accelerates, and the difficulty of crop germination increases. Farmers need more irrigation to ensure the normal growth of crops. However, the current shortage of electricity caused by coal shortage in India makes it difficult to guarantee irrigation water. Therefore, the cotton sowing period in India is difficult to guarantee. May be delayed until the end of May. Although farmers’ willingness to plant cotton in 2022/23 has increased due to the impact of high cotton prices, if the emergence situation continues to be affected, it may pose a threat to cotton production in the new season.

►The export restriction policy may be implemented, and the international cotton supply may shrink. At present, India’s domestic cotton prices are high. In order to stabilize the rise in cotton prices, the Indian Ministry of Finance announced on April 13 that tariff exemptions for cotton imports will be implemented from April 14 to September 30. However, as of May 13, the spot price of Shankar-6 rose by 10.47% month-on-month to 178.25 cents per pound, which shows that the import tax exemption policy has limited effect on stabilizing cotton prices. In the current situation that the planting of cotton in the new season is blocked, the price of cotton in India continues to rise. Therefore, the Indian government said it would not rule out issuing a ban on cotton exports until it was lifted on September 30. According to USDA forecast, India’s cotton exports in 2022/23 are expected to be 4 million bales, accounting for 8.41% of global exports. We believe that India’s cotton exports are an important factor affecting the global cotton supply under the current drought in the US cotton producing areas. Although India’s cotton production in 2022/23 is expected to be repaired compared with last year, if India’s cotton export restriction policy is implemented, resulting in a significant contraction in export volume, it may further aggravate the global cotton tension, and international cotton prices may rise again under the influence of good news. .

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Post time: Jun-24-2022