Prices for Cotton Fall Below ₹60,000/Candy Due to Weak Demand for Yarn and Garments
Unrest in Bangladesh adds to sector's woes.Cotton prices in India have fallen below ₹60,000 per candy (356 kg) due to sluggish demand for yarn and garments, according to industry sources. However, there is hope for a slight improvement around mid-August.
The situation has been further complicated by recent student unrest in Bangladesh, which has resulted in about 150 fatalities. This unrest has disrupted the small volume of Indian cotton exports to Bangladesh, as noted by a Raichur-based sourcing agent who also serves as the vice president of the All India Cotton Brokers Association.
Cotton Corporation of India's Price Reduction
The Cotton Corporation of India (CCI), holding approximately 20 lakh bales (170 kg each) procured under the Minimum Support Price (MSP) scheme, has reduced its sale price by ₹1,800 per candy in response to the weakened demand, according to industry analyst Das Boob.
As of Monday, Shankar-6 cotton, a benchmark for exports, was priced at ₹56,800 per candy. The spot price for kapas (unprocessed cotton) on the Multi Commodity Exchange (MCX) was ₹1,506.50 per 20 kg, while in the Rajkot Agricultural Produce Marketing Committee Yard (APMC), kapas was quoted at ₹7,505 per quintal.
Globally, cotton prices have also declined, with the December delivery price on the InterContinental Exchange in New York standing at 69.01 cents per pound (approximately ₹45,800 per candy).
Impact of Import Duties and Market Conditions
K. Selvaraju, Secretary-General of the Southern India Mills Association, noted that Indian spinning mills face challenges in the domestic market due to a lack of price parity. Cotton imports are subject to an 11% customs duty, making them ₹5,000-6,000 more expensive per candy, further affecting competitiveness.
"Cotton prices are at their lowest in a long time, with buyers and sellers both hesitant to engage," said Popat. He added that prices are currently below the MSP set for the upcoming 2024-25 crop year, which has been increased to ₹7,121 per quintal for the medium staple variety predominantly grown in India.
Market Outlook and Sector Challenges
Selvaraju expressed that while 2023 was particularly challenging for the textile sector, 2024 has shown some improvement. However, the industry is still recovering from the robust period of 2018-19. With the season ending in two months, stakeholders are cautious, awaiting clearer demand signals.
Popat suggested that demand might pick up between August 15 and the end of September, potentially reviving cotton movement. He noted that globally, demand for cotton has been impacted due to slow yarn and garment offtake, exacerbated by high interest rates discouraging inventory holding.
The sector needs to regain confidence for prices to trend upwards again, although they may have hit the bottom, Popat said.
Sowing Trends and Future Prospects
Das Boob noted that although cotton sowing has decreased by 5-7%, favorable rainfall and a good harvest could offset the reduced acreage. Popat added that while cotton acreage is down in Gujarat and North India, it is better in Maharashtra, Madhya Pradesh, Andhra Pradesh, and Telangana, with an overall potential change in area ranging from a 2-3% increase or decrease.*
Given the current trends, the government may need to direct the CCI to procure cotton in the next season under the MSP program, Boob suggested.
Read More :>Cotton Farmers Concerned Over Crop Damage from Rains in Telangana
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