In Cotton Market, India Wins as U.S.-China Dispute Escalates
Weak rupee bolsters appeal of India’s exports, analyst says.
(Bloomberg) -- In the global cotton market, India stands to be a winner amid escalating trade tensions between the U.S., the world’s top exporter, and China, the biggest buyer.
The weak rupee makes India’s exports more appealing, and freight costs to the neighboring Asian country can be relatively cheap, Keith Brown, the president of Keith Brown & Co., a brokerage in Moultrie, Georgia, said in a telephone interview. “It’s a question of price and proximity,” he said.
“China will still get cotton from the U.S.” possibly indirectly, he said. Mills may obtain some cargoes via Vietnam, or buy American supplies including a tariff, he said.
Cotton on Tuesday tumbled by the exchange limit on ICE Futures U.S. in New York and has slumped 12 percent from a four-year high of 94.82 cents a pound on June 6. China has bought almost 1.5 million bales from the U.S. this season, “and traders are now concerned about cancellation of those sales,” Louis Rose, director of research and analysis at Rose Commodity Group in Memphis, Tennessee, said in a report. A bale weighs 480 pounds, or 218 kilograms.
The Cotton Association of India said last week that output this season will rise 8.3 percent from a year earlier, boosting exports. China’s inventories have dwindled from a record in 2015 amid a decline in acreage. The government plans to issue additional import quotas because adverse weather damaged the domestic crop, and a shortfall of high-quality fiber looms.
In the U.S., cotton futures rose as much as 21 percent this year as a drought eroded crop prospects in West Texas, the top producing region.
“We went up way too fast, and now we are coming down way too fast,” Brown said.
Futures for December delivery fell 3.95 cents, or 4.5 percent, to close at 83.82 cents a pound on Tuesday after tumbling by the limit of 4 cents.
To contact the reporter on this story: Marvin G. Perez in New York at mperez71@bloomberg.net
To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net, Patrick McKiernan, Steven Frank
©2018 Bloomberg L.P.