Agri Business

Cotton prices top record ₹1 lakh/candy toeing global trend

Subramani Ra Mancombu | | Updated on: May 17, 2022
Rising demand for cotton globally amidst lower supplies is attributed to the rise in prices

Rising demand for cotton globally amidst lower supplies is attributed to the rise in prices

Lack of quality produce pushing up rates despite higher pressing of raw cotton

Cotton prices in the Indian domestic market topped a record ₹1 lakh a candy (356 kg) as global prices for the natural fibre topped 150 US cents a pound (₹92,000 approximately).

“Cotton prices firmed up during the weekend itself. Best quality cotton is quoted at ₹1.10 lakh a candy, medium quality at ₹1 lakh and cotton of lower quality is offered at ₹90,000-95,000,” said Rajkot-based Anand Poppat, a trader in raw cotton, cotton yarn and waste. 

Rising demand

According to the Gujarat Cotton trading Association (Gujcot), Shankar-6 cotton, the benchmark for exports, was quoted at an average ₹1.025 lakh a candy on Tuesday. 

In the global market, benchmark cotton futures dropped a tad on Tuesday to 148.65 cents a pound (₹91,300 a candy) from 150 cents on Monday. Rising demand globally amidst lower supplies is attributed to the rise in prices. 

Across the agricultural marketing committee yards from Andhra Pradesh to Gujarat, raw cotton ( kapas) quoted between ₹9,000 and ₹13,500 a quintal against the minimum support price of ₹5,726 a quintal. 

According to Gujcot, the pressing of raw cotton into lint increased in April this year to 69.95 lakh bales from 64.27 lakh bales in March, but it was lower than the 85.99 lakh bales pressed in April last year by 18.65 per cent.

Agmarket data

Data from Agmarknet showed that between April 1 and May 17, cotton arrivals nearly trebled to 8.45 lakh bales across the country compared with 3.07 lakh bales during the same period a year ago. 

Poppat said the data did not reflect the actual situation as farmers were also directly offloading their produce with ginning mills and hence, it could be lower.

Indian cotton prices are ruling at a premium to global prices in view of production being lower than last year, rising demand and non-availability of quality cotton.

The current surge in global price is also attributed to the USDA lowering global production by 1.8 million US bales (227 kg).

Impact of unseasonal rains

“The quality of cotton was affected by unseasonal rains during November-December, which affected the whiteness of the fibre. So, the more white colour you want, the more you need to pay,” said a South India miller based source. 

“There are over 1,225 mills which need 360 lakh bales of cotton annually. Our production is short by 30-35 lakh bales. This is the main cause for the rise in prices,” said Maj Gen O P Gulia, Chief Executive Officer, SVP Group. The group runs a modern spinning mill in Jhalwar, Rajasthan, besides a few more in Tamil Nadu.

According to the Committee on Cotton Production and Consumption (CCPC), a body comprising all stakeholders in the cotton sector, cotton production this season to September is estimated to be 340.62 lakh bales as against 352.48 lakh bales last season. The Cotton Association of India (CAI), an association of traders, projected cotton output at 323.63 lakh bales during the weekend.

‘On-call sales’

Even as the Centre was holding a meeting of the textile industry over the cotton prices situation, industry and trade sources say there is little the Government can do to control the prices since it was a global phenomenon driven by speculators.

The main reason for global prices to rule at a near 11-year high is “on-call sales” which is in the range of 80 lakh bales (170 kg). The USDA, which terms these sales as “unfixed” as prices are fixed only later, said large quantities of the sales for the July contract and low certified stocks have driven up cotton prices.

“The contracts have to be settled in the third week of June. After that, cotton prices will head lower,” said Poppat. 

Gulia said duty-free imports were allowed at least two months late and any relief for the textile industry would be around June-July since arrivals of imports are expected only then. 

Though a section of the textile industry is blaming cotton exports for the record rise in prices, shipments of the natural fibre are expected to estimated to drop to 40 lakh bales from 77.59 lakh bales.

Also, Indian cotton has been outpriced in the global market in view of the premium it commands. 

On the other hand, India is expected to import 18 lakh bales of cotton this season against 11 lakh bales last season, according to the CCPC. 

Published on May 17, 2022
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