Coronavirus is not only about a massive health scare, but it is also dampening businesses across the world. Around 2,50,000 bales of cotton export from India to China has been temporarily on hold. However, Indian cotton exporters expect the situation to be a momentary roadblock and not affect the total amount of exports anticipated for the current season.
Last month, Indian exporters had signed a deal for exporting 700,000-800,000 bales of cotton to China, of which 400,000 bales are already exported, according to a newswire. The order for the remaining bales may get cancelled it the virus outbreak continues for few more weeks.
Going by the price point of the cotton bales in India, traders are hopeful of finding alternate buyers in case exports to China get completely halted. It is because cotton prices in India are currently at a lower level of Rs. 39,500-40,000 per candy of 356 kg compared to international market price of Rs. 46,000 per candy. Bangladesh, Taiwan, Vietnam and Indonesia can be prospective buyers of Indian cotton.
Most Chinese firms scale back operations or close for long periods around the Lunar New Year holidays, which began on January 24 this year. But China’s government has extended the holidays, announced widespread transport restrictions and told many businesses to stay closed longer to limit the spread of the virus, according to Chinese media reports. Things are still not clear about when the workers will be able to resume work in factories.
Meanwhile, shipment delays could impact the local cotton prices which might force Cotton Corporation of India (CCI) to intensify procurements from farmers and ensure that the domestic prices remain above the minimum support price.
Cotton plays an important part in the Indian economy. The country is the second largest producer of cotton, a prime raw material for the textile industry.
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