The slowdown in the economy coupled with the fall in demand is putting pressure on cotton prices in the global market. The demand for yarn from spinning mills is negligible in the market. Due to this they are losing Rs 30 to 40 per kg in the sale of yarn. Prabhu Dhamodharan, convener of the Indian Texpreneurs Federation, said high levels of inventories along with global retail sales in a sluggish demand environment have slowed down the pace of garment manufacturing.
The US FSCRIR agency believes that global cotton prices are peaking. The risk is high and the economy is slow, so demand has started weakening. Whereas the situation is expected to improve in the next season due to good harvest and better weather.
The second-month futures market at ICE New York rose from 111 US cents a pound at the start of the year to 5 cents on May 4. The figure of May 4 is the highest since 2011 when the prices reached 203. Currently cent prices are around 125 cents. According to Fitch Solutions, weakness is expected in the coming months due to the crop season beginning in August in India, US, China, Pakistan and Brazil. Cotton futures on ICE for delivery in July are currently at 143.45 cents 87,700 per candy, while cotton is available at 134.14 cents, or 82,000. The October and December futures are at 125.14 and 114.29 cents.
On the Zhengzhou Commodity Exchange, cotton for July delivery stood at 1,510 yuan per tonne, or 83,125 per candy, while September futures were at 19,555 and 19,285 yuan in November, respectively. In contrast, the benchmark Indian Shankar 6 cotton price for export is around 95 thousand. On the Multi-Commodity Exchange, the July contract price is 46330 per bale of 170 kg. According to the traders, neither the buyer nor the seller is present at these prices. Generally Chinese cotton prices are higher than Indian rates. But at present the situation is opposite. We expect demand to ease in the coming 3 to 4 months and this will bring down prices.
The good news is that the prices of cotton have increased the confidence of the farmers, as a result of which the area under cultivation has increased this time. This is expected to bring down cotton prices to normal levels in the coming season.
Last year, the cotton crop in India was severely damaged due to unseasonal rains between October-November. The Cotton Association of India has reduced its arrival figures from 360.13 lakh bales in October to 315.32 lakh bales due to rains.
Cotton prices hit an 11-year high this year, but trade in the garment industry has suffered due to a surge in energy prices due to the Russo-Ukraine war.
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