Indian Spinning Association Works to Calm Current Cotton Situation

The Southern India Mills’ Association (SIMA) has called for calmness among spinners in India in the wake of the country’s downward cotton production estimate.

On July 13, India’s Cotton Advisory Board revised this year’s production estimate downward to 33.8 million bales (170 Kg each) – 1.4 million bales less than the February estimate and substantially lower than the production in the past two seasons.

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In reacting to the downward estimate, SIMA has requested mills to not panic and resort to rush purchases, as prices have risen abnormally high by about 44 percent since April. To offset the abnormal rise in price in domestic markets due to speculation, SIMA Chairman Mr. M. Senthilkumar has suggested larger mills opt for imports to help normalize the price situation in India.

Mr. Senthilkumar noted that the price rise has been due to speculation that acreage would drop, but that the area under production will be good enough for a comfortable supply situation.

According to SIMA, a drastic increase in price in the domestic market will negatively impact the Indian textile sector, as the international cotton price is over 10% lower than Indian price levels. The domestic cotton price is making the situation uncompetitive for the Indian spinning and textile sectors, and would negatively impact the export of textile goods.

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Analyzing the cotton price situation from the spinners’ point of view, Mr. Senthilkumar pointed out that while clean cotton price has increased over Rupees 40 per kilogram, yarn price for 40 Ne count has disproportionately risen only by Rupees 6 to Rupees 23 per kilogram in the past three months.

To help provide a stable price situation, SIMA has appealed to the Indian Government to consider a “Cotton Price Stabilization Scheme.” It has also requested the government for additional support programs such as 5% interest subvention for cotton purchases during the peak season (October to April), increasing the credit limit from three months to nine months, and reducing the margin money requirement from 25% to 10%.

With the ICE December contract at 74 cents and significant reduction estimate of India’s production, all eyes are on what the actual production will be in the United States this fall.

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