Cotton growers in India are mining white gold with prices of the natural fibre hitting a fresh high. Raw cotton or kapas prices in Gujarat’s Rajkot markets -cotton trading hub in the country- inched closer to ₹12,000 per quintal on Thursday, nearly double from what it was a year ago.

Similarly, the processed or ginned cotton on the Multi-Commodity Exchange (MCX) was quoted at all-time high of ₹85,150 per candy (356 kg) on Wednesday against ₹46,175 a candy in March 2021.

The fibre is on fire following strong demand, supported by rising international prices. ICE Futures for May contract last quoted at 130 cents a pound against 85 cents in March last year. The rupee rate has moved down from 73 against a dollar in March 2021 to 76 now.

At the Rajkot market, cotton arrivals were recorded at 300 tonnes on Wednesday with the highest price quoted at ₹2,368 per 20 kg or ₹11,840 a quintal.

Speaking to BusinessLine, Vinay Kotak, Director, Kotak Ginning and Pressing Industries Pvt Ltd, said, "As of now two cotton stakeholders are making money, i.e. farmers and stockists. The current rally appears to be a genuine one. There are domestic fundamental factors which are driving the prices but also there are global funds and investors riding over the sentiment and further fuelling the prices. So there is a mixed situation."

‘Sustained uptrend’

An official at the Rajkot market yard informed, "Farmers are bringing their cotton crop in smaller quantities to take maximum advantage of the rising prices. There has been a sustained uptrend for past few weeks on firm demand from mills."

As per the Cotton Association of India (CAI), benchmark cotton variety, GUJ ICS-105 29mm quoted at ₹23,621 per bale (each of 170 kg) or ₹84,000 per candy on March 23, 2022. An year ago, the rates were lower by almost half at ₹12,710 per bale or ₹45,200 per candy for the same variety.

Export prospects bleak

However, at current record-high prices, India's cotton export prospects appear bleak. Ashwani Jhamb, Vice‑President, Indian Cotton Association Limited, said Indian consumption is robust and most of the Indian cotton will be consumed within the country. "The crop is expected to be short and India's consumption is likely to be higher, so we will see a consistent increase in the prices. In the coming three months, we expect the prices to further go up from the current levels," said Jhamb.

Notably, the Committee on Cotton Production and Consumption (CCPC) has estimated India's cotton output at three-year low. Also, the cotton ending stocks for the year 2021-22 is estimated to drop to a three-year low on buoyant global demand and Centre’s export promotion policies. The closing cotton stock for the current year as estimated by CCPC is 45.46 lakh bales, lowest after 44.41 lakh bales recorded in 2018-19.

Cotton output for the current season to September is estimated at 340 lakh bales, the lowest in three years. “Also consumption is going to be good because of the pent-up demand. So, there will be a shortage of good quality cotton and also overall cotton. At such high rates, we don’t see the possibility of exports. The volatility will continue for the next three months,” said Kotak.

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