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Tuesday, Dec 03, 2002

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Cotton spurts on renewed mill demand

G. Gurumurthy


THERE has been a spurt in the domestic cotton prices even as the spinning mills have stepped up buying new crop to cover their raw material requirement.

The slow arrivals of the new crop in key terminal markets too have added to the price surge, the trade and industry sources said.

The prices quoted are up by Rs 800-1,000 from the last week's levels. The cotton market is also agog with speculation that in the face of the perceived decline in domestic production this year, the price spiral may continue as the textile units have to necessarily go for purchases for their immediate requirement, especially when they are haunted by the fear that quality cotton may not be available beyond February.

``We feel the popular domestic varieties currently being quoted in the Rs 19,000-20,000 price band may touch the Rs 21,000-mark,'' sources in leading cotton broking firm said.

Trade sources told Business Line that the spinners may in sympathy with the soaring cotton prices, increase the cotton yarn rates this month say by another 5 per cent during this month's yarn delivery though the yarn trade is sceptical on the market quickly absorbing a further hike in yarn rates. The spinners are worried on the weakened international yarn markets that do not support new prices. Right now, export enquiries are largely confined to coarser count categories.

Even while the domestic cotton prices show signs of further firming up, the cotton advisory board (CAB) in its latest sitting last month end has projected the size of the 2002-03 crop at 152 lakh bales, almost the same as last season's crop. The CAB's estimate of the new crop has come as a surprise to many in the cotton trade and the spinning industry who are expecting the new crop to be around 140 lakh bales only.

While the latest CAB figures arrived at in its sitting on November 29 last, has set the total mill consumption of cotton for the current season at 153 lakh bales and the small scale sector consumption at 12 lakh bales, the board has projected the imports to touch 20 lakh bales unlike last year when the imports remained less than 16 lakh bales. ``The higher cotton import projected for this year is surprising, especially when the total output has been estimated to be as high as last year,'' the trade sources wondered.

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