Southern India Mills' Association Advises Caution to Textile Mills Amidst Cotton Price Surge
In response to a recent surge in domestic cotton prices, the Southern India Mills' Association (SIMA) has cautioned textile mills in the southern states against panic buying. S.K. Sundararaman, the Chairman of SIMA, emphasized the need for prudence in procurement decisions as cotton prices experienced a notable increase of 10% to 12% in the last 15 days.
The widely-used Shankar-6 variety of cotton, in particular, witnessed a substantial rise, reaching nearly ₹62,000 per candy from ₹55,300 just two weeks prior. Sundararaman urged mills to exercise caution and not succumb to panic buying tendencies in light of these price fluctuations.
The Committee on Cotton Production and Consumption has estimated the current cotton season's production to be 316.57 lakh bales, with imports at 12 lakh bales and domestic consumption at 310 lakh bales. The surge in prices comes amid increased capacity utilization at mills, rising from 70% to 75% to a current range of 80% to 90%. Additionally, approximately 20 lakh bales have already been contracted for export.
Sundararaman pointed out that the demand for cotton export may decrease as domestic prices approach international levels. The global cotton market is anticipated to experience increased availability post-July 2024, attributed to enhanced production in countries like Australia and Brazil. The Intercontinental Exchange (ICE) cotton future is also expected to undergo a significant inverse post-July 2024, potentially leading to a softening of domestic cotton prices in India.
In light of the comfortable global cotton supply position and stock-to-use ratios in major consuming countries, Sundararaman advised spinning mills to resist panic buying. He stressed the importance of mills disregarding rumors and adopting a cautious approach to cotton procurement, considering the favorable global cotton supply conditions. As the situation remains dynamic, textile mills are encouraged to stay informed and make informed decisions to navigate the current cotton market fluctuations.
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