Will the rally in cotton prices stall? Atul Ganatra outlines the market outlook
In a recent interview with CNBC Awaaz, Mr. Atul Ganatra (CMD, Radha Lakshmi Group) shared key insights regarding the potential direction of the cotton market. He noted that ICE Cotton Futures, which stood at 80–81 cents about ten days ago, have risen to 84–85 cents. During the same period, Indian cotton prices also increased from ₹65,000 to approximately ₹68,000 per candy.
At current rates, the cost of cotton for spinning mills in South India—including delivery charges—works out to around ₹71,000 per candy. Based on this cost, the manufacturing expense for 30s count yarn comes to approximately ₹310–320 per kilogram, whereas mills in Gujarat are selling the same yarn for around ₹295 per kilogram. Consequently, mills purchasing cotton at these high prices could face a loss of ₹15–20 per kilogram.
For this reason, the ongoing rally in cotton prices appears likely to pause. Furthermore, spinning mills are holding record levels of cotton stock this year, with an inventory sufficient for about 150 days. New buying by mills is also expected to remain limited at these elevated price levels.
Mills reportedly held a stock of approximately 85 lakh bales as of July 31. Additionally, the CCI holds 25–26 lakh bales, while traders hold around 25 lakh bales. There is also a possibility of importing about 10 lakh bales. Considering the arrivals of both old and new cotton, stocks are expected to remain adequate by the end of the season.
Ultimately, the direction of the Indian cotton market will depend largely on ICE Cotton Futures, and the domestic market is likely to track the movement of ICE Cotton.
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