The unforeseen cancellation of exports orders for 4,00,000 bales of cotton by Indian traders will seriously affect yarn production in Bangladesh and this could have negative consequences on apparel exports say experts. “It is a sad incident,” said Abdul Hai Sarker, Chairman of Purbani Group, which imports 30,000 bales of cotton a year, 15 per cent of which comes from the neighbouring country. Bangladesh imports 46 per cent of its annual requirement of the natural fibre from India.

Atul Ganatra, President of the Cotton Association of India, reportedly said last week, Indian cotton traders have cancelled contracts involving 4,00,000 bales of cotton after a hike in domestic prices and rising rupee which made exports unattractive. Prices rose over 15 per cent in the past six weeks post bollworm infestation that significantly reduced supplies in India — the world's biggest producer of the natural fibre. Local spinners have already increased prices of yarn after the latest move by the Indian traders, said Mohammad Hatem, former Vice-President of the Bangladesh Knitwear Manufacturers and Exporters Association.

Currently, the widely consumed 30-count yarn is selling at $3.30 a kg in local markets, up from $2.90 to $2.95 in the first week of the year, he said. Hatem disclosed garment exporters had negotiated their work orders based on the previous rates of yarn, so the sudden hike in rates will throw their calculations overboard along with their profit margins. Mehdi Ali, President of the Bangladesh Cotton Association, however, said Indian cotton traders' about turn is unlikely to cause much damage as the quantity of the cancelled shipment is too little.

Data from the US Department of Agriculture record that global cotton production is up nearly 7 per cent to just over 120 million bales since May. In fiscal 2016-17, Bangladesh imported 6.5 million bales of cotton, up from 5.5 million bales a year earlier. Bangladesh spends about $3 billion a year for importing cotton for local consumption.