Indian cotton prices decline on slack demand, slow yarn movement
Cotton prices fell by about 7.5 percent over the past month due to the lack of movement and the decline in demand for yarn. However, industry experts say that once natural fiber prices stabilize, the industry may become confident and return to buying.
Currently, the situation is bad. There is no movement in bales of cotton and yarn due to low demand. “Mills are shrinking production due to lower yarn prices and lower demand,” said Ramanoj Das Pop, sourcing agent for the multinational corporation based in Raichur, Karnataka.
“The ginning mills (which process raw cotton into pile or cotton) have had orders for a month. After that, they haven’t received orders yet. Demand is weak and yarn exports have slowed,” said Anand Popat, a cotton, yarn and cotton waste trader in Rajkot.
export impact
Global demand is declining and it has affected exports. “The domestic market is not able to absorb materials diverted from the export market to the domestic market,” said Ravi Sam, President, South India Mills Association (SIMA).
“Inventories of cotton yarn are reported to be declining in all major markets including China on an annual and historical average basis,” said Prabhu Damodaran, coordinator of the Indian Entrepreneurs Federation (ITF).
Cotton prices are currently running at $55,500-56,000 for candy (356kg), down from Rs60,000 last month. Typical rate (the rate at which most trades are made) capas (raw cotton) ruled at ₹ 7,100 a quintal in the yard of the Agricultural Products Marketing Commission in Rajkot – down ₹ 200 since the beginning of this month.
On the Multi Commodity Exchange, the Cotton contract for August was quoted at $55,720 candy. On the Intercontinental Exchange, New York, the July contract was priced at 79.63 US cents (about INR 53,000 candy).
Spinning discount
According to SIMA’s Sam, textile exports fell 14 percent in the 2022-23 fiscal year with textile shipments down 23 percent. Exports of textiles and cosmetics declined by 26.7 percent.
In May, he said, the downward trend continued with textile exports down 12 percent overall.
“There is no spinning movement even though the spinning mills offer a discount of $30/kg to the hosiery manufacturers especially. The SIMA chief said that the mills have to incur a loss of 15-20 rupees per kg. The Ukraine war and the economic situation in the US and Europe have worsened the situation.
“Spinning mills in northern India have a two-month supply of yarn. The turnover of yarn is very slow,” said Popat.
Rise of July?
“Current market rates will force every player to incur losses. No one is willing to sell cotton or yarn at lower prices,” said Das Pop.
However, the ITF’s Dhamodharan seemed optimistic. “The current bottom in yarn prices will lead to some continued buying from international buyers. We hope that with stable cotton prices our monthly export figures will improve further from July.
Sam said relief measures such as allowing duty-free imports and a free trade agreement with the European Union and the United Kingdom would help the sector to recover.
“Cotton continues to arrive at 65,000-70,000 bales per day, and prices fall back to the new MSP rate ($6,620 a quintal),” said Das Pop. Right now, prices are running in some places at $54,500-55,300 for the candy, but only a few are willing to sell, he said.
Cotton imports have risen unusually since April this year – a poor arrival season – as farmers stopped producing them and expected higher prices.
A matter of time
“Access will continue until September, although it has decreased slightly now due to the monsoon rains,” said Popat.
“I feel the current cotton prices look more reasonable and it’s time to look at the situation on MSP, delayed monsoons and low spinning rates. There should be some movement in the coming days,” said Das Pop.
Dhamodharan said that local buyers’ yarn stocks are low and they are aware that current prices are attractive and indicative of regular buying interest.
“The stability of cotton prices in a certain range for an additional two weeks will create more confidence and normalcy may return to trade soon,” he said.
Export bookings are quick but price is the main factor. The only problem is that the prices have to be consistent. “This is the factor we need to monitor,” said the ITF organizer.
“It is only a matter of time before demand picks up, provided the center has the right policies in place,” said the SIMA chief.
Sowing hit
Das Pop said the delay in the monsoon has affected cotton cultivation because sowing has yet to begin in the southern states. However, the area has increased in Saurashtra and Gujarat along with Rajasthan, Haryana and Punjab.
According to the Ministry of Agriculture, cotton cultivation decreased by 14.2 percent as of June 23 at 28.02 hectares.