Part I: What Will Happen to 2M Bales of Indian Cotton Shipments?

By Jim.Robinson|December 2, 2010

Indian cotton farmers are pleased with their crop this year, which could top 35 million bales (170 kg each). However, unseasonable rains have degraded the crop’s quality, and a significant portion of the harvest–which has already been sold to importers around the world–is stuck in the country’s severely congested ports.

Further complicating the situation is the fact that much of the 5.5 million bales of cotton previously approved for export by the government has not yet been shipped. Shippers had to apply for Export Authorization Registration Certificates (EARCs), and all of the 5.5 million bales were registered, with an export deadline of Dec. 15.

According to Chandrakumar Shiva, Chairman of Shiva International of Bangalore, India, less than 3 million bales will be shipped by that date, and questions surround the remaining 2.5 million bales that had been registered and promised to foreign buyers. There is no definitive way to say what will happen, but Indian government officials will meet on Dec. 10 to consider their options.

Shiva believes they will have to choose between three different paths:
1. Extend the export deadline to Jan. 15, and hope that is enough time to alleviate the congestion at ports and locate the necessary shipping containers.
2. Require exporters who already have their EARCs–but won’t be able to physically ship the cotton by Dec. 15–to reapply for another certificate.
3. Keep the Dec. 15 deadline and delay any further cotton shipments until the first quarter of next year.
Exporters surely are hoping for option #1 (extension of the export deadline), while domestic mills and textile companies are pressuring the government to choose option #3 (ban exports completely for the next three to four months). With global stocks at historic lows and more than 2 million bales of cotton hanging in the balance, the world will be eagerly awaiting the Indian government’s decision on Dec. 10.

Be sure to check next week’s newsletter (Dec. 9) for a follow-up story, as Cotton International interviews Mr. Shiva about the current market situation in India–one day before the government announces its decision.