India is all set to overtake the United States as the largest cotton exporter to China, the world's top cotton consumer and importer.

According to figures released by the East India Cotton Association, India's cotton exports to China in the seven months from October 2006 stood at 2.5 million bales (one bale equals 170 kg), slightly lower than 2.6 million bales sold by the US to Beijing.

"If the situation is favourable and our exports keep on rising, India will overtake the US in exporting cotton to China," EICA president Kishorilal Jhunjhunwala told Commodity Online.

He said by the end of the cotton year, India may be about a 100,000 bales more than the US exports to China.

"Our quality is improving and production is improving, that is why our exports are good," he pointed out.

Jhunjhunwala said exports to China during the cotton year ending September was likely to be about 3 million bales, the same levels as a year ago. But he expected US exports to China to come down from last year's level of 3.7 million bales due to growing competition.

According to EICA, the total cotton exports from India is likely to touch last year's level of 4.7 million bales, though a strengthening rupee had slowed exports over the last one month.

Jhunjhunwala said India's cotton production during the 2006-07 crop year was likely to be 27 million bales with better use of seeds and technology, up 11% from a year ago.

O P Agarwal, executive director, EICA pointed out that the result has been tangible in terms of both improvements in average cotton yields and in India's reputation for quality cotton.

Though China is the largest producer of cotton in the world it is also the largest net importer as its cotton production is lagging behind consumption, Jhunjhunwala said.

"India has emerged as a surplus producer of cotton because of the increasing production of cotton during the last three cotton seasons. Although cotton consumption in India is on the rise, there will still be a comfortable surplus," he said.

The Cotton Textile Export Promotion Council has proposed to the government to promote cotton as a brand in the overseas as well as the domestic market.

In the cotton season, October 2006-September 07, India's cotton exports are estimated at 800,000 tonne. Of this, almost 65% will be to China.

Meanwhile a leading cotton company said that world cotton markets could be headed for a supply-demand mismatch with higher consumption eating away surplus stock.

"The cotton surplus created in 2004-05 will be offset by increasing consumption over production," UK-based cotton news and information company, Cotlook Ltd managing director Ray Butler said.

Global cotton prices have ranged between 50-60 cents per pound for the past 2-2.5 years, he said.

As per the US department for agriculture forecast for global cotton supply-demand in 2006-07, production is estimated at 25.37 lakh tonne as against consumption of 26.42 lakh tonne.

Major cotton traders in the country say they will promote Indian cotton as a brand both in the overseas as well as domestic markets.

EICA said that similar to basmati rice, even cotton should be standardised and then branded based on its quality.

Jhunjhunwala said that the cotton sector has undergone a sea change mainly on account of government and industry initiatives.