Spinning mills are buying cautiously in view of the global economic crisis
Cotton prices in India have fallen to a two-year low due to weak demand due to the economic crisis in western countries, especially the US and Britain, traders said.
“There is practically no demand for cotton despite the low crop, which is in the range of 300 lakh bales (170 kg) including carryover stocks from last year. But demand for clothes in western countries is sluggish due to economic problems,'' said a source working for a multinational trading firm. Therefore, mills are not ready to buy even though farmers are ready to sell cotton (unprocessed cotton) at ₹7,000 per quintal
“Due to lack of demand, cotton seed prices have fallen below Rs 3,000 per quintal, while ginned cotton prices have gone up to Rs 56,000-55,000 per candy (356),” said Ramanuj Das Boob, sourcing agent for Raichur-based multinational companies. It has reduced." Karnataka.
CCI buys MSP
Raw cotton prices have now fallen to ₹7,200-7,300 per quintal and in some cases to the minimum support level of ₹7,020 per quintal for long staple cotton. “This is at a level that farmers have not seen in the last two seasons,” Das Bub said.
Currently, Shankar-6 cotton, the benchmark for exports, is quoted at ₹54,850 per candy (356 kg) in Rajkot, Gujarat. On the other hand, at the Rajkot Agricultural Produce Marketing Committee (APMC) yard, the price of raw cotton is ₹7,100 per quintal.
In the global market, cotton futures on the Intercontinental Exchange, New York are currently quoted at 78.25 US cents per pound (₹51,600 per candy).
The fall in cotton prices has resulted in the Cotton Corporation of India (CCI) procuring 2.5 lakh bales (170 kg each) from growers at MSP. It has spent more than ₹900 crore on these purchases so far.
delayed arrival of poll
“CCI procurement is not much compared to the arrival of 58 lakh bales so far. Last week, around 9 lakh bales reached various APMCs in the country. Daily arrivals were 1.1 lakh bales to 1.3 lakh bales, Popat said.
“The arrivals have been low so far due to elections in Madhya Pradesh and Telangana. Now that they are over, inflows will increase and peak. This could put further pressure on prices,” said Das Boob.
Popat said that spinning mills are facing problems due to fall in yarn prices. “CCH-30 (combed cotton hosiery) yarn prices have declined to Rs 230 per kg from Rs 245 a month ago. There is no movement of yarn,” he said.
Indian Texpreneurs Federation (ITF) convenor Prabhu Dhamodharan said cotton prices are gradually coming down in line with the actual demand trend.
challenging situation
He said, an estimate based on the usage survey and survey of 5 million spindles in Tamil Nadu shows that overall yarn production in South India has declined by about 17 per cent in November.
“The current situation is challenging for many spinning mills. Yarn production in the sector during November was lower by about 35 to 40 million kg compared to the maximum utilization level. Besides, 200 mills in the southern region are using 10-20 per cent viscose to produce blended yarn,” Dhamodaran said.
Lower prices may encourage purchasing by exporters. “Once the prices fall to ₹54,500-55,000 per candy level, exporters will start showing interest. Right now, only Bangladesh is buying,” said Das Bub.
“Around 3.5 lakh bales have been lifted for export. But the shipment of cotton and yarn is less,” Popat said.
growth of non-cotton fibers
Dhamodharan said two factors will keep cotton prices in check in the next few months. “A 15-20 per cent decline in production by the spinning sector in major consuming states like Tamil Nadu in the current quarter and increasing trend of spinners producing synthetic and cellulosic fiber blended yarns will keep prices under control for the next few months,” it said.
Non-cotton fiber sales from manufacturers are seeing good year-on-year growth. The ITF convenor said the trade expects less volatility from the current season through September 2024. There will be a more stable trend within the fluctuations of ₹1,000-1,500 per candy, which is a very basic requirement for the export competitiveness and performance of the entire value chain.
The source working with the multinational company, who did not want to be identified, said the current trend will continue for the next few months. “Something has to happen to increase demand. But we don't see anything happening now,' the source said.
Although the US crop is down, Brazil is making up for it. “But weak demand is holding back the market,” the source said.
Dhamodharan said that although retailers have started showing interest in placing fresh orders after their excessive inventories are exhausted, they are all playing it safe and keeping a tight control on their inventories.
"We need to wait until the first quarter of the upcoming calendar year to get accurate visibility of consumption trends across all developed markets," he said.
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