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Cotton prices continue to rule at elevated levels across the country with quality produce of the natural fibre commanding a premium.
“Arrival of cotton has dropped to 75,000 bales (170 kg each) across the country, but what is of concern is that there is a huge variation in the quality of the cotton coming to the markets,” said Rajkot-based Anand Poppat, a trader in cotton, cotton yarn and waste.
“Cotton quality is a concern. Yarn realisation from cotton is low due to this, forcing higher wastage for spinning mills,” said Prabhu Dhamodharan, Convenor, Indian Texpreneurs Federation (ITF).
If mills were able to get 73-74 per cent yarn from, say, 100 kg of cotton earlier, they are able to only 69 per cent. The rest become waste and thus, realisations for spinning mills decrease.
Current prices
Currently, kapas (raw cotton) are quoted between ₹8,000 and over ₹10,000 a quintal in agricultural markets in Rajkot, Gujarat, the hub of cotton production in the country. Prices are ruling at these levels in other States such as Maharashtra also.
Ginned cotton, on the other hand, is quoted at ₹78,000-79,200 per candy (of 356 kg) for Shankar-6 cotton, a benchmark for exports. On the Multi Commodity Exchange of India, cotton for delivery in April was quoted at ₹38,180 a bale or ₹79,953 a candy.
In the global market, benchmark cotton contracts on Intercontinental Exchange, New York, are currently quoting at 118.01 US cents a pound (₹71,425 a candy), down from the 10-year high it hit last month. Prices are up 35 per cent year-on-year but down over 3.5 per cent month-on-month.
Impact on exports
“In India, cotton today is available either below ₹70,000 or above ₹80,000 depending on the quality. If you want quality cotton, you have to pay a premium,” said Poppat.
This has impacted cotton exports, which have also been affected by domestic prices quoted at a premium to global prices.
“The current arrivals and price behaviour have brought to light the fact that the demand-supply balance could be tight. Despite prices ruling high, arrivals haven’t picked up much. This is an indication of the crop being lower than various projections,” said Poppat, who pegs the crop at around 315 lakh bales this season.
Dhamodharan said the textile industry lacked scientific data to realise the exact problem. “It is a long-term concern that scientific data is lacking in production, consumption and inventories,” he said.
Lower crop estimate
In its second advance estimate, the Union Ministry for Agriculture and Farmers Welfare pegged cotton production at 340.63 lakh bales for this season (October 2021-September 2022) against 352.48 lakh bales last season.
Last month, the Cotton Association of India (CAI), a body of traders, cut its crop estimates to 343.13 lakh bales from its earlier projection of 348.13 lakh bales. The US Department of Agriculture (USDA) has pegged India’s cotton production at 339.38 lakh bales, accounting for 22 per cent of the global production.
The USDA said though the area under cotton had dropped to a five-year low of 124 lakh hectares, a higher yield of 465 kg/ha had helped bridge the gap a bit.
Duty-free imports
Though textile industry players are concerned over a tight demand-supply balance, industry sources say it might still be under control.
“There is a possibility of the Government allowing import of cotton duty-free,” said ITF’s Dhamodharan.
Currently, cotton imports attract a five per cent basic customs duty and five per cent agriculture infrastructure cess. The textiles industry has been urging the Government to scrap the import duty, particularly after cotton prices skyrocketed this season.
“The situation may not be as serious as it is portrayed to be since exports will be lower this year,” said an industry source.
According to Poppat, 32 lakh bales of cotton have been exported until last weekend. CAI has pegged exports at 45 lakh bales this season, while the USDA has projected it at 70 lakh bales compared with 79 lakh bales last season.
The USDA said cotton consumption is projected at 332 lakh bales,including small scale units, a record as the textiles industry has expanded. This amounts to 21 per cent of the total global cotton offtake. CAI has projected mills consumption at 300 lakh bales this season against 292 lakh bales last season.
“If cotton prices rise further, there are risks of mills switching over to polyester despite high crude oil prices,” said Poppat.
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