May 3, 2012

China may prefer US, Bangladesh cotton over India's

China, the largest buyer of Indian cotton, may look to purchase the commodity from US and Bangladesh due to India's recent decision to first ban its exports and later undo it.

"China is traditionally India's biggest buyer of cotton. The changeable policies impacted China's enthusiasm to purchase cotton from India. Besides, cotton from the US is a good alternative to India's supply," Chen Jing, an analyst with CITICS Futures Company said.

"The opening of exports of cotton from India will add to the already ample supplies in the cotton market and push down prices in the international market," he told state run Global Times.

The decision by Indian government to ban cotton exports last month came as a surprise as cotton yarn and fabric exports to China amounted to US$3.1 billion last year.

The ban was subsequently reversed.

On March 31, China suspended its cotton purchases from the international market.

The country had begun a programme of buying cotton last September in order to replenish government reserves, and also to stabilise domestic farm prices and hedge against price volatility.

In April, China resumed buying cotton from the US by purchasing 90,964 bales, which was 63% of the 1,44,805 bales sold to all foreign buyers in the week ending April 19, according to data from the USDA.

"China will continue to buy cotton from the international market since the global price is lower than the domestic one. The US and Bangladesh are likely to be the priority suppliers due to their steady supply and stable policies," Hu Biliang, an agriculture researcher with the Chinese Academy of Social Sciences, said.

"China's demand for cotton is expected to decline in the next few months given the dramatic drop in exports of textile products recently," he said.