The Hindu Business Line : Bright prospects for cotton — Textile mills favour low-cost domestic variety

WITH the new cotton crop arrival likely to gather momentum by this month-end, domestic cotton seems to be advantageous price-wise for the textile mills, especially for the spinners seeking on larger cover.

The relatively pest-free crop condition prevailing this year and the fairly good fibre quality being widely reported in major production centres have bolstered optimism for the spinners to go for local cotton.

Wary on prices, the spinners expect that the high volume arrivals likely by next month would tend to dip the prices for the new crop at least in the initial weeks.

Their hope that there may not be any aberration in the prices of domestic cotton this season springs from the anticipated size of the crop which, according to industry sources, will be around 140-145 lakh bales.

The sources say that as against the previous year's crop size of 158 lakh bales (of 170 kg each), the 145 lakh bales production expected this year, despite the initial apprehensions on the drought, should not be a bad one.

Cotton trade circles say that the new arrivals into the major terminal markets now in the order of around 30,000 bales per day would go up to one lakh bales in another 15 days or so.

Sources in the leading cotton trade/commission agencies told Business Line that the Rs 18,500-19,000 price band being presently quoted for the new `Shankar-4' variety (on mill delivery) should look attractive for the spinners as the equivalent variety of overseas cotton quoted at 53-55 cents (per pound) should be seen by the mills in the region as `high-priced'.

In addition to the firming global cotton prices, the additional 10 per cent customs duty the Indian importers are to bear may render the price of imported cotton unattractive for the mill consumers for the present.

Cotton traders say though the mill-consumers have not given indications so far on any aggressive buying of cotton in the face of the slowed down yarn market for the past one-month, the mill buying will have to start over the next two weeks to replenish their stocks.

There has been no major industrial strife seen this time on account of distribution of bonus to the textile workers in the region nor were the reports of any production loss. Move over, most of the mills managed to settle bonus this year at percentage lower than last year's levels. This, according to the market sources, should give better liquidity for the mills and enable them to have continuity to their productivity levels.

The textile mills watch with interest this year the operation of private trade in the cotton trade arena in Maharashtra in the face of the Maharashtra State Cooperative Cotton Growers Marketing Federation moving away from the monopoly procurement. Unlike the past rigidities in cotton marketing under the federation which largely entertained periodical selling with longer delivery, the entry of the private trade in that State's cotton marketing is expected to act against price spirals in the crucial November-December months this time.

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