Cotton Rally Hits Apparel Makers; Some Duck Better.

MUMBAI: A spurt in has spelt misery for Indian as overseas buyers resist price hikes which could see Indian exports falling as much as 10 percent in the year-ending March.

Global apparel markets, still limping to recovery from a recession, saw New York cotton hitting a 15-year high.

India, the world's second-biggest producer, mirrored and intensified the rally to an all time record last month, as prices zoomed up nearly 70 percent in a year.

"Nobody is willing to pay these higher prices. There is resistance from every buyer. While wages increased and cotton prices zoomed, export realisations are more or less static. How do I absorb this cost?" said Rajendra Hinduja, managing director at Gokaldas.

"For apparel exports, we are in a difficult situation."

India's , worth $23.5 billion, are set to fall around 10 percent in FY11, R.K. Dalmia, senior president at Century Textiles told Reuters.

"Already in garment, exports growth is not there. This year it will be lower unless competitiveness improves, market improves and cotton stabilises," Dalmia said.

Dwindling stocks from last year and a harvest delay due to heavy rains in the first half of September also supported prices.

A RAY OF HOPE

The year-long cotton rally had a flip side, though. Farmers increased acreage under the crop and India estimates a record crop of 32.5 million bales in 2010/11, while a few exporters put it closer to 35 million bales on all time high acreage and better yields.

This bumper crop is a ray of hope that prices will ease. Traders said prices are likely to start correcting in the next few days on higher arrivals and a government decision to postpone exports by one month until Nov 1.

"We can see upto 10-15 percent correction in prices due to arrival pressure, but they will not fall sharply as the pipeline is empty. Mills and exporters are hungry," said an exporter based in Rajkot, Gujarat.

Monsoon rains had started withdrawing from the country and weather was dry over key growing areas in the past four days, accelerating harvesting process.

"The situation should be better by end-October. We'll get a good crop. I see things in a better shape, in volume or value terms," Gokaldas Exports' Hinduja said.

Despite the rally in local cotton prices, they were lower than Pakistan and Bangladesh, which are likely to buy significant amount from India in 2010/11 due to lower domestic production.

And some Indian exporters have already benefited from higher cotton prices in the South Asia neighbourhood, home to cheaper rivals for export markets, Bangaldesh and Pakistan.

"Indian apparel exports have been gardually rising amidst the competition from these low-cost producing neighbour contries over the period of past six months," said Manish Mandhana, Managing Director at Mandhana Industries .

Source : economictimes.indiatimes.com