{"id":3580,"date":"2017-12-08T10:16:41","date_gmt":"2017-12-08T10:16:41","guid":{"rendered":"https:\/\/www.ldc.com\/cn\/stories-insights\/our-cotton-platform-10-years-in-india\/"},"modified":"2023-05-24T14:37:02","modified_gmt":"2023-05-24T12:37:02","slug":"our-cotton-platform-10-years-in-india","status":"publish","type":"stories-insight","link":"https:\/\/www.ldc.com\/cn\/en\/stories-insights\/our-cotton-platform-10-years-in-india\/","title":{"rendered":"Our Cotton Platform: 10 Years in India"},"content":{"rendered":"\n
In 2007, LDC moved a single trader from Memphis to set up the Indian cotton trade Platform in a small apartment in Delhi. As India advanced to become the world\u2019s largest cotton producer, LDC\u2019s Cotton Platform has grown too.<\/p>\n\n\n\n
To mark the Platform\u2019s 10th anniversary, we sit down with Mitesh Shah, LDC\u2019s Head of Cotton for South Asia & China, to talk about our growth in India and the cotton business in Asia.<\/p>\n\n\n\n
What was the biggest challenge to set up the operation in India?<\/h3>\n\n\n\n<\/figure>\n\n\n\n
Oh, there were many! Some challenges are to be expected when setting up a business, no matter where. Others were more complex and specific to the local market. As with all commodities, the biggest challenge was to earn the trust of our clients \u2013 and we are proud of what we have achieved today.<\/p>\n\n\n\n
We launched the Platform just as India was beginning to export more and more cotton. Many people labelled us as an export merchant only, and plenty of exporters back then had a reputation for selling low quality cotton.<\/p>\n\n\n\n
We wanted to change that image, so we built a great quality control team on the ground. Eventually — with a lot of time, effort, and attention to detail \u2013 we were able to earn a reputation for providing the best quality product and service to our clients.<\/p>\n\n\n\n
Another challenge was to educate buyers and sellers about the commercial value of managing price risk, using a deferred market system that allowed them to buy and sell forward.<\/p>\n\n\n\n
What has changed in the 10 years since the Platform was set up?<\/h3>\n\n\n\n
When we started, most people were focused on exports, but our initial goal was to serve domestic markets. In 2007, India exported 7.5 million (480lbs) bales \u2013 making it the largest competitor for the US. The attractive price of Indian cotton led to further export increases. And as greater volumes of Indian cotton became available on the market, consumers grew more accustomed to it, which boosted its value.<\/p>\n\n\n\n
LDC had already been trading with India for a long time, buying Indian cotton at local ports for exports and selling from foreign origins to Indian mill customers for imports.<\/p>\n\n\n\n
With the advent of BT (genetically modified) cotton in 2003, domestic yields improved dramatically and India soon became one of the largest cotton producers in the world. As a global merchant, we saw the need and opportunity to help manage part of this large produce and provide solutions to Indian mill customers.<\/p>\n\n\n\n
Since starting with just one guy trading in two states, we have expanded to seven cotton offices around the country plus a marketing office in the south.<\/p>\n\n\n\n
Since India offers a wide variety of qualities – from one of the cheapest to the most expensive – we have gradually learnt to trade more and different varieties.<\/p>\n\n\n\n
The last 10 years have given us valuable insights into the Indian cotton market. Our own research has improved too, helping us to provide better solutions to the Indian market and by extension, to the global market as well.<\/p>\n\n\n\n
We have learned and adapted to local conditions, while retaining a global mindset.<\/p>\n\n\n\n
What impact did LDC\u2019s presence have on the Indian cotton market?<\/h3>\n\n\n\n<\/figure>\n\n\n\n
Since we set up, the farmer and cotton ginner have gained a buyer, so they don\u2019t have to sell only to the local mills. We also reduce distress selling during harvest by helping Indian farmers to access finance indirectly. With more access to the international market, the farmer also gets a fairer price. That\u2019s a very positive development.<\/p>\n\n\n\n
Similarly, the seasonal nature of the cotton crop means that local textile mills once had to spend a lot on storing cotton. But with us, they can be assured of a continuous and reliable supply of quality cotton, and the opportunity to lock in future supply at competitive rates.<\/p>\n\n\n\n
India\u2019s market has matured in the past decade \u2013 from being a strictly spot market, where commodities are traded for immediate delivery, to having some forward component to it. This has primarily been possible because global merchants like LDC have been able to demonstrate the value of forward markets in mitigating risk.<\/p>\n\n\n\n
How has the cotton market evolved in Asia as a whole and what caused the big changes?<\/h3>\n\n\n\n<\/figure>\n\n\n\n
The market has seen some dramatic shifts largely linked to the Chinese government\u2019s policy of building up stocks, then liquidating them.<\/p>\n\n\n\n
In terms of consumption, demand has shifted from China to Vietnam, India, Pakistan, and Bangladesh. Bangladesh and Vietnam have overtaken China as the world\u2019s largest importers of cotton. In the past 10 years, Vietnam\u2019s cotton consumption and imports have more than quadrupled. In India, domestic consumption has grown by nearly 30%, while China\u2019s cotton consumption has dropped nearly 25%.<\/p>\n\n\n\n
But China is starting to recover consumption with a favorable textile policy in Xinjiang and liquidation of Chinese government cotton stocks, and we think Chinese cotton imports will soon increase as well.<\/p>\n\n\n\n
Meanwhile, India has become one of the world\u2019s largest cotton producers, while Chinese production has dropped by as much as 38% since 2007. Australia is also producing more, since increased water availability allows them to grow more cotton, offering better margins.<\/p>\n\n\n\n
What about sustainability and traceability? Are these trends as important in Asia as in the western world?<\/p>\n\n\n\n
As sustainability becomes an increasingly important issue, end consumers are compelling brands to adopt sustainability standards. Efforts such as the Better Cotton Initiative (BCI) are gaining momentum. Asia is a large consumer of cotton, accounting for as much as 80% of world consumption, and obviously it is at the forefront of this change.<\/p>\n\n\n\n
LDC is working on cotton traceability efforts in Asia and elsewhere, providing this service for certain high quality, premium cottons such as Pima, which is grown in California for Asian customers. This area is still at an early phase, but it will continue to grow.<\/p>\n\n\n\n
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