Cotton exports have begun to fall as merchants charge big premiums above benchmark US futures in anticipation of weaker output at a time when local textile mills are in high demand, according to Indian industry officials.

Higher premiums demanded by India, the world's largest cotton exporter, may compel Asian consumers such as Bangladesh, Vietnam, and China to boost imports from other suppliers such as the US, Brazil, Australia, and African nations.

"Exports are unprofitable. We're exporting a limited quantity to Bangladesh, but no other customers are interested "Reuters spoke with Vinay Kotak, director of Mumbai-based Kotak Ginning and Pressing Industries.

Cotton is being offered to purchasers in Bangladesh for January and February shipping at roughly 135 cents per lb, cost and freight included, nearly 20 cents more than US futures, according to dealers with global trading businesses. India often charges a premium of 5 to 10 cents per pound above US futures.

Record domestic pricing, according to Kotak, might restrict exports in the 2021-22 marketing year, which ends on September 30. He predicts that India would send only 4 million bales this year, down from 7.8 million bales the previous year, as consumers shift to competing providers.

So far this season, Indian mills have shipped 1.8 million bales and are expected to ship roughly 1 million bales in January and February, according to merchants.

According to a Mumbai-based dealer with a worldwide trading organisation, a few clients from Bangladesh are paying higher costs for Indian cotton because they want rapid shipments and want guarantee of delivery.

Almost 70% of India's cotton exports to Bangladesh are across land borders, making shipments more predictable than from competitors.

Bangladesh also imports cotton from the United States, but the harvest will be ready only after March, and there is no certainty that supplies will arrive on schedule due to labour constraints caused by the newest wave of the Covid-19 outbreak, which might increase port congestion, the dealer said.