Thursday, February 22, 2024
Manpower of India
HomeInvestmentIndian cotton prices decline on slack demand, slow yarn movement

Indian cotton prices decline on slack demand, slow yarn movement

Cotton prices have declined nearly 7.5 per cent over the past month due to its lack of movement and slack demand for yarn. However, industry experts say once the natural fibre’s prices stabilise, the industry might turn confident and return to buy.

“Currently, the situation is bad. There is no movement in cotton bales and yarn due to low demand. Mills are curtailing the production due to low yarn prices and lower demand,” said Ramanuj Das Boob, a sourcing agent for multinationals based in Raichur, Karnataka.

“Ginning mills (which process raw cotton into lint or cotton bale) have orders for a month. After that, they are yet to get orders. The demand is slack and yarn exports have slowed,” said Anand Popat, a Rajkot-based trader in cotton, yarn and cotton waste.

Impact of exports

“Global demand is down and it has affected exports. The domestic market is unable to absorb the material diverted from the export market to the domestic market,” said Ravi Sam, Chairman, Southern India Mills Association (SIMA). 

“Reports are indicating lower cotton yarn inventories in all major markets including China on a year-on-year and historical average basis,” said Prabhu Dhamodharan, Convenor, Indian Texpreneurs Federation (ITF). 

Cotton prices are currently ruling at ₹55,500-56,000 a candy (356 kg), down from ₹60,000 a month ago. The modal price (the rate at which most trades take place) of kapas (raw cotton) is ruling at ₹7,100 a quintal at Rajkot agricultural produce marketing committee yard — down ₹200 since the beginning of this month. 

On the Multi Commodity Exchange, August cotton contracts were quoted at ₹55,720 a candy. On the InterContinental Exchange, New York, July contracts were quoting at 79.63 US cents (about ₹53,000 a candy).

Discount for yarn

According to SIMA’s Sam, textile exports declined 14 per cent in the  2022-23 fiscal with shipments of textiles dropping 23 per cent. Exports of yarn, fabric and made-ups slipped 26.7 per cent. 

In May, the downtrend continued with textile exports sliding 12 per cent overall, he said. 

“There is no yarn movement despite spinning mills providing ₹30/kg discount to particularly hosiery manufacturers. Mills have to incur ₹15-20 a kg loss,” the SIMA Chairman said. The Ukraine war and the economic situation in the US and Europe have compounded the situation. 

“Spinning mills in North India have yarn stocks for 2 months. The yarn movement is very slow,” said Popat. 

Upswing from July?

“Current market rates will force every player to incur losses. No one is willing to sell cotton or yarn at lower prices,” Das Boob said. 

ITF’s Dhamodharan, however, sounded optimistic. “The current bottoming out of yarn prices will lead to some steady buying from international buyers. We hope that, with stability in cotton prices, our monthly export numbers will improve further from July,” he said. 

Sam said relief measures such as allowing imports sans duty and conclusion of free trade pact with the European Union and United Kingdom will help the sector rebound. 

“Cotton arrivals continue to be 65,000-70,000 bales daily and prices are slipping to the new MSP rate (₹6,620 a quintal),” said Das Boob. 

Cotton arrivals are unusually high since April this year — a lean arrival season — as farmers had held back their produce expecting higher prices.

A matter of time

 “Arrivals will continue till September, though they are a tad lower now due to monsoon rains,” said Popat.

Dhamodharan said yarn inventories with domestic buyers are low level and they are realising that current prices are attractive and evincing interest in usual buying. 

“Cotton price stability at a particular range for two more weeks will create further confidence and normalcy may return to the trade soon” he said.

Export bookings are brisk but price is the key factor. The only issue is prices need to be consistent. “That’s the factor we need to watch,” the ITF Convenor said. 

“It is just a matter of time before demand picks up, provided the Centre has the right policies in place,” the chairman of SIMA said. 

Sowing hit

Das Boob said the delay in monsoon has affected cotton cultivation as sowing is yet to begin in southern states. However, the area has increased in Saurashtra, Gujarat, besides Rajasthan, Haryana, and Punjab.   

According to the Ministry of Agriculture, cotton cultivation is 14.2 per cent lower as of June 23 at 28.02 lakh hectares. 



Please enter your comment!
Please enter your name here

- Advertisment -
Manpower of India

Most Popular

Recent Comments

Translate »