Indian textile mills are importing cotton as domestic cotton is more expensive. The escalating trade war has led to a slump in global cotton prices. The December new crop cotton contract on ICE Futures US hit a four-year low earlier this week and analysts are expecting another decline due to worsening relations between the US and China, the world's largest exporter and importer respectively.

So far, deals to import around 50,000 bales of cotton have been signed for delivery in October to December, despite the quarter being the peak harvesting season in India. Mills in north India have contracted 6,000 tons to 10,000 tons of cotton, while deals of around 3,000 tons have been signed by mills in southern India. Import deals are being signed mainly with the US, Brazil and West Africa. But prices may fall ahead of the harvest starting in October, which may halt imports. The situation is different from last year, when traders were busy selling the commodity to overseas buyers due to expectations of a bumper domestic crop, which eventually did not materialise.

Global prices have also been hit with an estimate of a rise of around five per cent in cotton output in 2019-20, and slower growth in consumption, which may lead to higher ending stocks for next year.