Cotton prices in the Indian domestic market have slipped below ₹60,000 per candy (356 kg) on slack yarn and garment demand but the situation could improve a tad from around the second week of August, industry players said.
The situation has been compounded by the recent student unrest in Bangladesh that killed about 150 people.
“Yarn movement is slow. Our small quantity of exports to Bangladesh has been halted due to riots there,” said a Raichur-based sourcing agent for domestic mills and multinationals. He is also the vice president of All India Cotton Brokers Association.
CCI cuts prices
“We had increasing demand only from Bangladesh but that has been affected due to the Bangladesh unrest. The curfew has affected the movement of goods,” said Anand Popat, a Rajkot-based cotton, yarn and cotton waste trader.
Given the slack demand, the Cotton Corporation of India (CCI), which has stocks of about 20 lakh bales (170 kg) procured as part of the minimum support price (MSP) scheme, cut its sale price by ₹1,800 per candy, said Das Boob.
On Monday, the price of Shankar-6, the benchmark for exports, was ruling at ₹56,800 a candy. On MCX, spot price for kapas (unprocessed cotton) was ruling at ₹1,506.50 per 20 kg, while in Rajakot Agricultural Produce Marketing Committee Yard (APMC), kapas was quoted at ₹7,505/quintal.
Globally, cotton prices have dropped below 70 cents a pound. On Monday, cotton for delivery in December on InterContinental Exchance, New York, was ruling at 69.01 cents (₹45,800/candy).
Import duty impact
“There is no parity for spinning mills in the domestic market. Imports of cotton attract 11 per cent Customs duty and they are ₹5,000-6,000 a candy costlier. It has also affected our competitiveness,” said K Selvaraju, Secretary-General, Southern India Mills Association.
“Cotton prices have slipped to such lows after a long time. Buyers are not buying, while sellers too are not ready. Prices are below the MSP announced for the new seasons starting October,” said Popat.
The MSP for cotton for the 2024-25 crop year has been increased to ₹7,121 a quintal for the medium staple variety that is largely grown in the country. “Good monsoon rain and better crop prospects have also made the market slack,” said Das Boob.
Turning cautious
“2023 was a bad year. Compared to that 2024 is not so bad,” said Selvaraju, adding that the textile sector was unable to get back to the strong position witnessed during 2018-19.
With only two months remaining for the season to end, all the stakeholders have turned cautious as they have ample demand to meet their requirements, said Das Boob.
“But I feel from August 15 to September-end, demand may improve and cotton could see some movement,” he said.
Popat said globally too demand for cotton has been affected as yarn and garment offtake has been hit. “Because of the high interest rates, no one wants to hold supplies in the pipeline. It is more of a hand-to-mouth situation currently,” he said.
The sector has to gain confidence for prices to resume the uptrend, though they may have reached the bottom, Popat said.
Lower sowing
Das Boob said though sowing in cotton has been reported 5-7 per cent lower, ample rain and good harvest may witnessed better yield to make up the drop in acreage.
Poppat said the area in Gujarat and North India under cotton was low. However, it was better in Maharashtra, Madhya Pradesh, Andhra Pradesh and Telangana. “Overall, there could be a 2-3 per cent rise or fall in cotton area. A clear situation will emerge around the middle of August,” he said.
Going by the current trend, the Centre may have to ask CCI to procure cotton next season under the MSP programme, said Das Boob