Cotton prices may top ₹75,000/candy on tight supplies

Cotton prices will likely touch ₹75,000 per candy by the middle of this year due to higher demand and lower crop output in the current season.

Atul Ganatra, President, the Cotton Association of India, said that India’s low cotton production with higher consumption will soon change its status from a net exporter to an import country.

Currently, the cotton prices trade around ₹62,500–63,000 per candy and are expected to rise further steadily with arrivals drying up.

Ganatra believes that cotton prices could touch ₹70,000-75,000 per candy in June-July.

Read more: Cotton - Crying out for change

While global cotton prices are trading at a four-month low due to weak demand amid recessionary trend, Indian mills are experiencing robust demand due to higher consumption.

Weak exports outlook

Last year, India’s cotton export was at 42 lakh bales, but this year it may fall to about 30 lakh bales. However, given the high domestic prices it may even fall to 25 lakh bales.

Ajay Kumar, Director, Kedia Commodities, said spinning mills are currently running at 100 per cent capacity. The future of spinning mills looks promising as China and Bangladesh are slowing down, and demand is shifting to India, he said.

The global cotton price outlook for the upcoming 2023-24 crop year is uncertain, with factors affecting both supply and demand.

Planted acreage is expected to decrease due to high input costs and competition from other crops. The timing of any changes in weather patterns will be critical, particularly in West Texas where conditions remain extremely dry, said Kumar.

On the demand front, there is uncertainty as global GDP growth is expected to slow in the medium-term, leading to a continued decline in cotton consumption.

However, sustained spending and lower apparel imports could lead to a drawdown in inventory and a potential recovery in demand. The effects of inventory adjustments may be tempered by a shaky macroeconomic outlook.

With variables affecting supply and demand, the sustainability of high domestic cotton prices remains uncertain.

A section of cotton trade, however, feels that cotton prices could be hovering around current levels as arrivals this yeare are expected to continue during offseason months of May-July. “Farmers have held back stocks this year and they will be slowly releasing them in the coming months. This should not pose any problem,” said a trader, who did not wish to be identified.

According to Rajkot-based Anand Popat, a cotton, yarn and cotton waste trader, arrivals are currently hovering nearly 1.5 lakh bales, though they were lower last week on account of rain in some regions. “Ginning factories, which would have normall ended their operations by now, are still in operation,” he said.

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