The Hindu Business Line : Cotton rates ease on hopes of bumper crop

COTTON from the new crop has begun to hit key terminal markets and the prospect of a sobering price is likely in the face of a projected bumper crop this season.

The daily volume of the new arrival into these markets is currently estimated in the region of 5,000-8,000 bales (of 170 kg) which is expected to rise steadily over the next few weeks. The varieties of cotton coming into the Punjab-Haryana-Rajasthan (around 2,000 bales) and Gujarat markets (2,000 bales) and Maharashtra and Madhya Pradesh (around 1,500 bales) are the Sankar-4, J-34, H-4 and MECH-1 varieties, according to cotton trade sources.

Even as all the market indicators point toward the domestic cotton sector witnessing a bumper production this year, the new season has begun with prices declining sharply. This week prices are 7-8 per cent lower than last week. Sources told Business Line that the cotton for immediate supplies was quoted in the Rs 22,000-22,500 per candy (of 355.62 kg), whereas the supplies to be delivered in a week's time is tagged slightly lower at Rs 21,500-21,700.

In view of the projected crop size this year, there has been hardly any forward booking of supplies by the mills, especially by the South-based textile mills and whatever transactions are taking place are meant for immediate requirement, the sources said.

The lack of enthusiasm on forward sale by the buyers was partly due to the huge domestic crop projected for this year and partly, on account of the uncertainty in the cotton yarn and fabric markets, they added. The yarn and fabric markets continue to be in the throes of a slackened demand that is largely attributed to the confusion surrounding the the removal of the quantitative restrictions of textile trade under the WTO arrangement.

With most textile industries facing liquidity crunch unable to realise payments for their finished products, the cotton market is expected see further price fall in the coming weeks when the volume of daily arrivals would steadily build up.