Cotton prices have started easing with the new crop arrivals across key producing States, after having ruled at record highs in May. Trade sources estimate the daily market arrivals in the range of 25,000-30,000 bales (170 kg) and prices are seen softening ahead of peak arrivals in mid-October.

Lack of demand with millers preferring to wait for the prices to drop further amidst a decline in global prices is influencing cotton prices in the country.

At agricultural produce marketing committee (APMC) yards in States such as Haryana, Rajasthan, Punjab and Gujarat the modal price (the rate at which most trades occur) is ruling above ₹8,000 a quintal, lower than the ₹9,000 levels at the beginning of the week. 

Slack demand

However, in some markets such as Halvad in Gujarat, the modal prices have slipped below the ₹8,000 mark to around ₹7,300 levels. Current market prices are higher than the minimum support price of ₹6,380 for long-staple cotton and ₹6,080 for medium staple for the 2022-23 marketing year starting October 1.

Prices have come down by about 35 per cent in the past two months from around ₹1.1 lakh per candy (356 kg) to around ₹72,000-73,000 levels, said Ramanuj Das Boob, a sourcing agent in Raichur. However, there is no demand from the spinning mills. The movement of yarn and finished products is sluggish due to the slow demand from both domestic and overseas buyers, Boob said.

Currently, prices of Shankar-6 ginned cotton, the benchmark for exports, are ₹69,250 a candy (356 kg). However, they are still at a premium to the New York cotton. Benchmark cotton futures on InterContinental Exchange, New York, are currently quoted at 85.32 cents a pound (₹56,325 a candy). 

On Multi Commodity Exchange, November cotton contracts are currently quoted at ₹29,400 (₹61,567 a candy).

Chances of further fall

“While it is difficult to predict prices, the expectation is that there are more chances of the market coming down as arrivals peak during mid-October,” he said.

Anand Popat, a Rajkot-based trader in cotton, yarn and cotton waste, said spinning mills are in no mood to buy cotton, while some mills have shut down due to raw material shortage.

Farmers have expanded the cotton area by 9 per cent to 128 lakh hectares. According to the government’s first advance estimates. the production is seen higher at 341.90 lakh bales this crop year (July 2022-June 2023) against 312.03 lakh bales last crop year. 

The latest spell of rains in parts of Telangana, Andhra and Karnataka is seen aiding the crop. “The condition of the cotton crop is good to excellent. There are no reports of any major disease to the crop from any region,” Popat said, adding that the recent spell of rain in North India could impact the crop in some parts. 

Forward quotes

A textile industry official said prices of kapas (raw cotton) may not drop below ₹8,000 a quintal given the tight supply situation. Besides, the carryover stocks are low. 

Due to the low carryover stocks, the Tamilnadu Spinning Association (TASMA) has urged the Centre to ask the Cotton Corporation of India (CCI) to procure cotton. TASMA presented a memorandum to BJP President JP Nadda in this regard two weeks ago, besides seeking an indefinite extension of duty-free import of cotton. But the CCI is unlikely to enter the market unless prices drop below the MSP.

Multinationals such as Viterra, a Glencore company, and Louis Dreyfus have lowered the forward quotes for delivery from November onwards. The MNCs are quoting ₹61,500-63,300 for various staple lengths for delivery during November-April. The quotes are lower by at least 13 per cent from the prevailing price levels, indicating that prices could come down under further pressure, sources said.

CCI’s views

According to Popat, current cotton stocks with industry and others is 21.50 lakh bales. 

In an order recently, the Textiles Commissioner said the CCI will be the nodal agency for undertaking price support operations and that the MSP will be effective from October 1. “Since farmers would continue to get rates much more than the MSP, they may not require any MSP intervention by CCI. However, to meet any such eventualities, CCI has fully geared up its infrastructure to ensure that no farmer is put in any distress,” said PK Agarwal, CMD, CCI.

(With inputs from Subramani Ra Mancombu, Chennai)

Related Topics