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Cotton prices soar to *record high in India on global trends

2021-10-27 07:54:29
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*Cotton prices soar to *record high in India on global trends*

*Projections of tight *supplies later this season leave industry worried*
Domestic cotton prices have soared to a record high of ₹63,000 per candy (356 kg) as the global market has surged on low production, rising demand and supply constraints.*

*On the Intercontinental Exchange (ICE), New York, cotton prices have gained a tad over 50 per cent year-on-year rising to 108.67 cents a pound (₹66,025 a candy).*

*“Quality cotton in the domestic market costs about ₹65,000,” said PK Agarwal, Chairman and Managing Director, Cotton Corporation of India (CCI), which had procured cotton over the last two years to ensure markets do not drop below the minimum support price (MSP) level.*

*Ruling above MSP*
*Currently, raw cotton prices in various markets across the country are ruling above ₹7,000 a quintal against the MSP of ₹5,726 fixed for this year. Prices much above MSP means the CCI will not need to do any market intervention this year, according to Agarwal. **“The prices are good for farmers where private traders and millers are ensuring good remuneration for cotton,” the CCI CMD said.*

*“Prices are moving up since the cotton balance sheet is tight and ending stocks are lower. Except China, no other country seems to have ample stocks,” said Anand Poppat, a Rajkot-based trader of raw cotton, waste and yarn.*

*With the quality of the cotton crop reported to be good, he expects Indian offers to soon be at par with global rates. “Indian cotton prices will be near international rates,” said CCI’s Agarwal.*

*Post-Diwali scenario*
*Southern India Mills Association (SIMA) Secretary-General K Selvaraj said post-Diwali prices might decline in view of higher arrivals. “Arrivals will flood markets during December-January pushing down prices. But prices are likely to rule around ₹50,000-₹51,000 a candy,” he said.*

*Cotton Association of India (CAI) President Atul Ganatra said the cotton market is expected to be steady between ₹62,000 and ₹65,000.*

*According to Major General OP Gulia, CEO, SVP Group that is producing yarn, cotton prices have seen their best and are unlikely to escalate further. “It will stabilise around its current level. There is news of restrictions in China, the US and Britain markets. We will have to wait and watch… That would influence the prices internationally,” he said.*

*Poppat said cotton prices were surging since the retail pipeline was empty. “There is huge demand for cotton as well as yarn. Speculators in the European Union have taken advantage of this and built open positions,” he said.*

*Gulia said domestic market demand was huge and yarn was in short supply. “Orders (yarn) are now being booked for three months in advance. The trend will continue for the better part of the year,” he said.*

*CAI’s Ganatra said cotton mills were running with 30-45 days of stocks.*

*Exports may dip*
*Almost every player in the industry is of the opinion that cotton exports could be lower at 50 lakh bales this season (October 2021-September 2022) compared with 75-80 lakh bales last season. “India might export a minimum 50 lakh bales,” said Poppat, while Agarwal put the figures at 40-50 lakh bales.*

*“Indian cotton exports will be reduced by 35 per cent from 78 lakh bales (last year) to around 45-50 lakh bales this year,” said Ganatra.*

*Selvaraju said if cotton* *quality turns out to be good as expected, then more could find their way to destinations abroad. “That will make things a little difficult for mills,” he said.*

*Poppat said exports would lead to tighter and lower ending stocks this season.* *The industry is divided over the carryover stocks for this season, though.*

*Carryover stocks*
*SIMA’s Selvaraju said the Committee on Cotton Production and Consumption (CCPC) had pegged the carryover stocks at 120 lakh bales and if additional 10-15 lakh bales of cotton would have been consumed or exported, ending stocks could be 105 lakh bales.*

*According to estimates of CAI, a trade body, the carryover stocks are estimated at 82.50 lakh bales.*

*Selvaraju said cotton production this year is estimated to be 360 lakh bales (170 kg) and if the carryover stocks are pegged at 100 lakh bales and imports at 10 lakh bales, the industry would have a total supply of 470 lakh bales.* *“This year, cotton consumption could be 330 lakh bales but it depends on the power situation. In Andhra Pradesh, industries are provided only 50 per cent of their power needs during peak hours,” he said.*

*Ganatra said production this year is expected to be 360 lakh bales, plus or minus three per cent. “The crop is good in Central and Southern India, but it is lower in the Northern parts,” he said.*

*Disturbing trend*
*“The cotton crop is likely to stay at the same level as of last year, at approximately 360 lakh bales (25% of world production). Though the sowing area was lower this year, the yield per hectare has increased from approximately 500 kg per hectare to 750 kg,” Gulia said, adding the quality of cotton is good this year.*

*Global supply of cotton will be short and prices are unlikely to head south soon, he said.*

*The emerging market trend does have spinning mills worried. Expecting problems from private traders, who might buy huge stocks of cotton and try to sell during non-peak arrivals season at high prices, SIMA has written to the Prime Minister’s office to order CCI to purchase 40-50 lakh bales.*

*“CCI can release the stocks regularly at the rate of at least five lakh bales a month to keep unscrupulous traders at bay,” Selvaraju said.*

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