Yarn exports up in October, fabrics down as exporters hit by liquidity crunch

In October 2017, the first month of 2017-18 cotton marketing year, recorded 89 thousand bales (of 170 kg each) of shipment as against 51 thousand bales in October 2016. With 2016-17 marketing season (October-September) closing at 6.74 lakh bale, it implies that exports this year will be significant.

The price realization averaged (FOB) INR119 or US cents 80.8 per pound this month as against the Cotlook Index ‘A’ at 78.7 per pound Shankar-6 spot at US cents 75.4 per pound.

Compared to a year ago, realization this year was US cents 7 lesser than last year but more than the ruling spot values and Cotlook ‘A’ index averages. However, a discerning trend will emerge in November this year since last year the markets were disrupted by the demonetization policy of the central government that banned high currency notes with effect from 9 November. The event had pushed  peak period by almost a month and remained extended until May 2017.

Bangladesh, Vietnam, and Indonesia were the largest importers of cotton with combined volumes at 82 thousand bales amongst the 11 countries that imported cotton from India in October. China was the fourth largest at 2.9 thousand bales. It was also the lowest price paying importer at US cents 62.85 per pound FOB while Bangladesh paid US cents 83 per pound on an average.

Cotton Availability

The Cotton Association of India released the first estimate of the country’s cotton crop for the current season (October 2017-September 2018) at 375 lakh bales as against 337.25 lakh last year. The increase this year is due to a 19% expansion in acreage compared to last season.

Cotton balance sheet for this new season shows a surplus, with a closing stock of 39 lakh bales. Exports are expected at 63 million bales while domestic demand is pegged at 320 lakh bales.

Woven fabric export declines

Woven fabric shipments could not sustain the sharp recovery of September as it hit a three-month low in October. Volumes declined 13% to 332 million sqmtrs worth US$276 million or INR1,170 crore, the levels seen in July 2015, the first month of new tax regime (GST).  Thus, cumulative export in the first seven months of 2017-18, was 2,450 million sqmtr, down 3.6% compared with same period a year ago. In terms of value, woven fabric export was worth US$1,990 million or INR12,680 crore. Exporters were reportedly struggling with a liquidity crunch because of delayed GST refunds, leading to the highest overall trade deficit in 35 months.

In October, 143 countries imported woven fabrics from India, with Bangladesh leading, fol-lowed by Sri Lanka and UAE. The three together accounted for 34% of total woven fabrics ex-port during the month. During the month no shipment was recorded to 11 countries who had imported last year. However, they were replaced by 17 countries which imported fabric worth US$2.40 million this October.

Nepal, Chad, Reunion, Afghanistan and Romania were the fastest growing markets for woven fabrics, and accounted for 3.75% of total export value in October.

About 56% of woven fabrics exported were made of 100% cotton worth US$154 million (INR985 crore) with volumes at 188 million sqmtr. The average unit price realization was at US$0.82 a sqmtr, about US cents 5 less than a year ago.

Plain fabric exports, accounting for 62% of all types of woven fabrics exported in October 2017, declined 26% in volume on year on year comparison. Shipment totaled 228 million sqmtr worth US$170 million. Bangladesh, United Arab Emirates, and Sri Lanka were the top markets for plain fabrics.

Denim, the second largest woven fabric exported in October maintain a healthy trend, in-creasing by 18% year on year in volume and 24% in value at US$33 million. They were mainly imported by Bangladesh with Guatemala Sri Lanka following at a distant. Denim exports to these markets were worth US$24 million.

Shirting/suiting volumes increased sharply but values realization was down. Sarees export were hit significantly, falling over 40% year on year this October.

A sharp rise in export of furnishing fabric continued into October with USA and UK dominating markets during October.