Domestic cotton prices in India have soared to 63,000 rupees per kandy (356 kg) as low production, increased demand and supply constraints have driven up prices in the global market.
On the Intercontinental Exchange (ICE) in New York, cotton prices rose more than 50% year-on-year to 108.67 cents per pound. “Good quality cotton is priced around Rs 65,000 in the domestic market,” said PK Agarwal, president and managing director of Cotton Corporation of India (CCI), which has been procuring cotton for the past two years to ensure the market does not fall below the minimum support price (MSP). .
Currently, the price of raw cotton in various markets across the country is above Rs 7,000 per quintal (100 kg), while the MSP set this year is Rs 5,726. Agarwal said prices well above MSP means CCI does not need to make any market intervention this year. “Prices will be favorable for farmers and private traders and cotton spinners will ensure good remuneration for cotton,” he said.
Anand Poppat, a Rajkot-based trader of raw cotton, scrap and yarn said : “Prices are rising due to tight cotton supply and demand and low ending stocks. Except for China, no other country seems to have adequate stocks.” The quality of the cotton crop is reportedly good and he expects Indian quotes to be in line with global prices soon flat. CCI’s Agarwal said: “Indian cotton prices will be close to international levels.”
K Selvaraj, secretary-general of the South India Mills Association (SIMA), said that due to the increase in arrivals, post-Diwali The price may drop. “During December-January, the market has seen huge arrivals, thereby driving down prices. But prices are likely to be around Rs 50,000 to Rs 51,000 per kandi.” Atul Ganatra, chairman of the Cotton Association of India (CAI), said the cotton market is expected to be Stable between Rs 62,000 and Rs 65,000.
OP Gulia, CEO of SVP Group, which produces yarn, said cotton prices have peaked and are unlikely to rise further. He said: “Prices will stabilize around current levels. There is news of limited prices in the Chinese, American and British markets. We will have to wait and see… This will affect international prices.” Poppat said that cotton prices are soaring due to empty retail channels. “There is huge demand for cotton and yarn. Speculators in the EU have taken advantage of this and established positions.” Gulia said that the domestic market demand is huge and yarn is in short supply. “Orders (yarn) are now booked three months in advance. This trend will continue for most of this year.” CAI’s Ganatra said 30 cotton spinning mills -45 days in stock. Almost all industry insiders believe that cotton exports this year (October 2021 to September 2022) may be less than 5 million bales, compared with 7.5-8 million bales in the previous season. Poppat said India may export at least 5 million bales, while Agarwal estimated the figure at 4-5 million bales. “Indian cotton exports this year will decrease by 35% from 7.8 million bales last year to about 4.5-5 million bales,” Ganatra said. Selvaraju said that if the quality of cotton is as good as expected, more cotton may be exported abroad. “This will cause difficulties for cotton mills,” he said. Poppat said exports will lead to tighter supplies this year and lower ending stocks. However, the industry is divided on the current year’s carryover inventory. SIMA’s Selvaraju said the Cotton Production and Consumption Council (CCPC) has estimated carryover stocks at 12 million bales, and if an additional 1-1.5 million bales of cotton are consumed or exported, ending stocks may be 10.5 million bales.
According to estimates from trade body CAI, carryout stocks are estimated at 8.25 million bales. Gulia said: “Cotton production is likely to be the same as last year, about 36 million bales (accounting for 25% of world production). Although the sown area has decreased this year, the yield has increased from about 500 kilograms per hectare to 750 kilograms.” He added The cotton quality is very good this year.
Global cotton supplies will be in short supply and prices are unlikely to fall anytime soon, he said. Emerging market trends do worry cotton mills. Problems are expected to come from private traders who may buy large quantities of cotton and try to sell it at high prices during the off-season. The South Indian Mills Association has written to the Prime Minister’s Office asking the Cotton Corporation of India (CCI) to purchase 4-5 million bales of cotton. Selvaraju said: “CCI can regularly release stocks at a rate of at least 500,000 bales per month to deter unscrupulous traders.”
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