Indian cotton prices are ruling firm above ₹65,000 a candy (356 kg), but the trend has left the trade divided over reasons for lower arrivals this season. In view of the firm trend in prices, which are 20 per cent higher than global rates, the natural fibre consumption will likely be lower, stakeholders say.

Currently, Shankar-6 cotton, the benchmark for exports, is quoted at ₹67,500 a candy. On the InterContinental Exchange in New York, cotton is quoted at 79.69 US cents a pound (₹52,150/candy) for delivery in March. On MCX, cotton for delivery this month is quoted at ₹31.310 for a bale of 170 kg (₹65,566/candy). 

Arrivals lower

At the Rajkot agricultural produce marketing committee (APMC) yard in Gujarat, the modal price (rates at which most trades take place) of raw cotton is currently ₹8,700-8,800 a quintal, at least ₹500 higher than the same time a year ago. “This is because arrivals are low as farmers are holding back the produce,” said Rajkot-based cotton, yarn, and cotton waste trader Anand Popat. 

“Over 125 lakh bales of cotton have been harvested. But hardly 50 per cent of the harvested crop has arrived in the markets. Looks like farmers want prices like last year, but the chances of cotton prices ruling high are remote,” he said. 

“Till December 15, 65 lakh bales of cotton may have arrived across APMC yards in the country. Even if 20 lakh bales arrive until December 31, at least 240 lakh bales will have to arrive between January 1 and June 30, taking into account the 340-350 lakh bales production estimate,” Ramanuj Das Boob, a sourcing agent for multinationals in Raichur, Karnataka.

Inflow increasing?

This would mean 1.3-1.4 lakh bales of cotton will have to arrive daily from January 1. “It is difficult to see that much cotton arriving. It is doubtful if farmers will hold on to so much cotton. Probably, the production, which looked bright until two months ago on higher acreage and a quality crop, may have been hit by the vagaries of weather in States such as Telangana and Karnataka,” he said. 

But Popat said daily arrivals were now between 1.1 and 1.3 lakh bales. “Last week, arrivals were 8 lakh bales,” he said. 

According to Agmarknet data, cotton arrivals till now from October 1 are 57.98 lakh bales, compared with 98.31 lakh bales a year ago. Arrivals are lower in all cotton-growing States this year. 

The high prices for cotton are now deterring the textile industry. “Spinning mills are working at 50 to 70 per cent capacity,” Popat said. 

Plea to scrap import duty

Last week, the Indian Cotton Association President Atul S Ganatra wrote to Union Commerce Minister Piyush Goyal urging the Centre to scrap the 11 per cent import duty on cotton in view of domestic prices ruling over 15 per cent higher than global rates. 

“The availability of raw materials for our textile industry at a competitive rate has been severely impacted. This has eroded the competitiveness of our value-added products in the international market, and the textile industry is only working at 50 per capacity,” Ganatra said in the letter.

“Import duty removal will play a crucial role in determining the competitiveness of the value chain in immediate future order bookings for apparel exports,” said Prabhu Dhamodharan, Convenor, Indian Texpreneurs Federation. 

The current situation has resulted in the US Department of Agriculture (USDA) projecting Indian cotton consumption to decline by nearly 27 lakh bales. “Higher spot prices for cotton relative to other major spinners have eroded India’s stature as a competitive yarn exporter to China,” it said.

Demand muted

“We expect that Indian cotton consumption will be much lower than the USDA projections due to the continuing trend of lesser capacity utilisation by the spinning sector. Due to the fall in apparel exports, the “knits” segment of the value chain, which is a dominant consumer of cotton due to coarse count yarn production, is running with lesser capacity utilisation leading to lower consumption,” said Dhamodharan. 

“Domestic demand for cotton is muted this year due to low fabric demand. The high price of cotton compared to other countries is affecting the overall competitiveness when the demand is price sensitive,” said Ronak Chiripal, CEO, Nandan Terry.

This is one of the primary reasons for the decrease in the export of cotton yarn, cotton, and cotton fabric. “Domestic consumption has also suffered as a result of the overall downturn,” said Chiripal. 

“Farmers need to understand that if they hold back their produce, they will find it difficult to sell after February since ginning mills will close their operations,” said Popat.

Pink bollworm impact?

The third picking in cotton has begun, and they have begun to arrive, though the quality is a tad inferior. This could affect returns to growers, said a trader.

“Indian cotton is still expensive, and we are expecting some more correction in the coming days,” said Dhamodharan.

“It is likely that the crop has been affected by weather and the pink bollworm. We hear that farmers are getting 6-8 quintals a hectare when they should get 10-12 quintals. The situation does look alarming,” Boob said.

While the crop in Gujarat is reported to be good, production in Maharashtra is estimated at 85 lakh bales. “Daily arrivals are only 25,000 bales, though,” the Raichur sourcing agent said. 

According to the Committee on Cotton Production and Consumption, a body comprising all textile stakeholders, production this season (October 2022–September 2023) is estimated at 341.91 lakh bales, against 312.03 lakh bales last season. Consumption is projected at 311 lakh bales against 313.77 lakh bales, while closing stocks are likely to be higher at 46.51 lakh bales against 45.6 lakh bales.