Cotton squeeze: India will fill US gap
04/01/2008
Predictions in 2007 of a squeeze on cotton are coming true. This year began with grain prices hitting record highs when demand for soybeans, corn, wheat, rapeseed and palm oil surged on the news that crude oil had hit $100 a barrel.
Traders said the high grain prices were the result of increased global interest in biofuels.
Farmers in key agricultural markets, including the US, anticipated this turn of events and, last year, planted less cotton. The market there expects this year's cotton crop to be the lowest since 1984, even though demand for cotton is also high.
According to India's textile commissioner, Jagadip Narayan Singh, the squeeze on cotton has already started. He told Bloomberg that India was preparing to fill the gap the US will leave, particularly in exports to China. Reports suggest that India has exported the same amount of cotton in the last three months as in the whole of the previous year.
He said his country would produce a record cotton harvest this year of 5.2 billion kilos. The commissioner explained that he expected such a bumper crop because Indian cotton growers had begun to use genetically modified seed much more extensively than in past years.
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