As cotton prices surge, TN mills turn to imports

The surging rates of cotton, in combination with a shortage, have forced Tamil Nadu-based spinning mills to look at imports to meet their production requirements.

However, with the current fluctuations in international cotton prices, the spinning mills are adopting “a wait and watch” approach in anticipation of a further softening of prices.

GU Rathakrishna, President, Coimbatore Cotton Association told BusinessLine that India is now experiencing a cotton shortage as the crop size is smaller than what had been projected due to the monsoon’s failure in several growing areas.

The initial projection by the Cotton Association of India was 360-370 lakh bales, but this has come down to around 320 lakh bales in the current marketing season, which commenced in October 2018 and will continue till September.

Punjab, Haryana, Rajasthan, Gujarat, Madhya Pradesh, Maharashtra, Telangana, Odisha, Andhra Pradesh and Tamil Nadu are the major cotton producing states and the shortfall of the monsoon last year has badly affected the crop.

Because of the shortfall, Rathakrishna pointed out that cotton prices have gone up to ₹47,000-48,000 per candy of 356 kg, forcing spinning mills to go for imports, which are cheaper.

While Indian mills started importing cotton at 80-87 cents per pound (1 pound = 0.45 kg) , international prices have started moving northwards. This was reflected in the rates of the New York futures market, which is now hovering at 77-78 cents. Due to these price fluctuations, he said, there was not much buying and spinning mills are looking at a drop in prices.

If there is a price drop, there will be more buying by the mills. But producers in India are holding on to the crop on the assumption of a price increase due to a shortfall in the market. India usually depends on West African countries, the US and East Africa for imported cotton, he added.

Asked about cotton importers’ plans to make Kochi Port an inland point for imports, Rathakrishna said Tuticorin Port is the regular routing port to South India. Some international merchants bring cotton in containers using the Colombo Port as a hub.

However, spinning mills located in and around Coimbatore, Salem, Tirupur etc use Kochi Port’s proximity to move cargo from Gujarat via the coastal route. The buyers are also exploring the possibility of bringing in West African and East African cotton via Kochi into South India, he added.