Indian spinning mills turn cautious in buying cotton as season end nears
Spinning mills have turned chary in purchasing cotton as the current season is set to end in two-and-half months and are keen to avoid any liquidity problem.
“Being the end of the cotton season and liquidity issues in the overall market, (spinning) mills want to be careful in cotton purchases. Man-made and cellulosic fibre penetration has also helped mills to reduce their exposure to cotton,” said Prabhu Dhamodharan, Convenor, India Texpreneurs Federation (ITF).
The cost factor is driving the fashion towards alternate fibres and reducing cotton consumption in all stages, he said.
Slack demand
Prices quoted by Cotton Corporation of India (CCI), which has over 20 lakh bales (170 kg each) of stocks procured from farmers at minimum support prices this season, are a dampener despite slack demand, said Ramanuj Das Boob, a Raichur-based sourcing agent for domestic mills and multinationals. He is also the vice president of All India Cotton Brokers Association.
“If traders buy cotton from CCI and resell it to mills on credit, the economy doesn’t work out. So, they are also silent,” he said.
“Lack of demand for yarn and declining prices are creating hurdles for the textile industry,” said Rajkot-based Anand Popat, a cotton, yarn and cotton waste trader.
Speculator bearish
Bearish speculators on InterContinental Exchange, New York, are also responsible for dull trading in the domestic market despite strong fundamentals, he said.
Cotton prices have declined over 10 per cent since the beginning of 2024. According to the Economic Research Service (ERS) of the US Department of Agriculture, global cotton prices for 2024-25 season (August-July) are expected to decline for the third consecutive year.
Global production in 2024-25 is forecast at 119.1 million bales (226.8 kg), nearly 5 per cent higher than in 2023-24. It is the largest crop since 2017-18. Brazil and the US are expected to harvest higher crops, making up for the expected loss in China, India and Pakistan.
Current prices
Currently, December cotton futures on ICE are quoted at 72.60 cents a pound (₹50,000/candy of 356 kg). On India’s MCX, July cotton futures are ruling at ₹57,750 a candy. The price of Shankar-6, the benchmark for exports, was ₹57,900 on Monday. In Rajkot agricultural produce marketing committee yarn, kapas (unprocessed cotton) were quoted at ₹7,625 a quintal.
On Monday, CCI cut its price by ₹500 a candy across all States, said Das Boob, adding this comes after the corporation hiked prices by ₹1,900-2,000 within 10-12 days ending July 12.
Dhamodharan said the six-month domestic consumption season begins in September. “We expect some better stability in the retail market. Already many retailers have indicated about same stores sales growth. They expect good festival season this year,” he said.
MSP hike
The inventory level with retailers have reduced considerably. They do not stock up more than a week or 10 days requirement. “So we expect sales and consumption at yarn and fabric level will stabilise in the coming days,” said the ITF Convenor.
Das Boob said the market tendency kept traders away from purchase and it was difficult to fathom the reason for the slow movement. However, after the Centre increased the minimum support price (MSP) of cotton, some mills began buying. “Even CCI could sell around 3-4 lakh bales after that,” he said.
The government has increased the MSP for the current crop year (July 2024-June 2025) to ₹7,121 a quintal (for medium staple) from ₹6,620 last year.
Popat said the low prices for European yarn prices were also leading to a bearish trend.
Yarn exports stable
Das Boob said cotton prices have dropped due to low demand by mills as yarn prices are not supporting at the higher cotton price level.
Dhamodaran said cotton yarn exports have stabilised in the range of 9-10 crore kg per month. Buying by Bangladesh and Europe has been consistent over the past few months. “We expect the same level of calibrated buying in exports will continue in the coming months,” he said.
Meanwhile, Popat said cotton sowing has been completed in Gujarat and North India. In both these regions, the area will likely be 10 per cent and 30 per cent lower, respectively. However, higher acreage in Maharashtra, Telangana, Karnataka and Andhra Pradesh will ensure almost the same area of 123.87 lakh hectares as last year.
Das Boob said good rainfall has been reported all over Telangana and Karnataka, which is positive for the cotton crop. “Even Maharashtra has got sufficient rain,” he said, adding that the area under cotton in South India would be higher than last year.