Steady Rise in Indian Cotton Prices
January 23, 2017 While cotton production around the world continues to increase, the cotton situation in India is getting serious attention due to a steady rise in prices.
Spot prices of Sankar-6 and MCU-5 varieties are about Rupees 42,500 and 44,000 respectively per candy (355.6 Kilograms).
Currently, it is peak cotton arrival season in India, but the arrivals have been lagging behind the same period last season. While flowering was not that good, weather could not be blamed, as it has been reasonable for cotton during the growing season. The volatility has been attributed primarily due to trading issues and to the Indian government’s recent banknote demonetization policy.
Three different sources in cotton marketing, purchasing and spinning expressed the same reasons for the sudden increase in cotton prices.
The general manager of a 65,000-ring spindle mill in South India stated that his company procures about 40,000 bales (170 Kgs each) of cotton each year at an overall price tag of about Rupees 60 crores (Rupees 600 million). The variation of about Rupees 1000 per candy in a day can result in lot of economic problems for mills in India. Since December, the price has increased by about Rupees 4,000 per candy.
A source familiar with marketing stated that arrivals have been about 150,000 bales per day (1.5 lakhs bales per day), which is 50,000 less than normal in the peak arrival timeframe. Cotton farmers are reluctant to trade on credit and expect to be paid in currencies, which is currently difficult in India. Additionally, many are waiting to sell cotton so that they could realize higher prices, the source stated.
The view from the spinning mills is that yarn prices are stable and there is demand for yarns and made-up goods such as bedspreads in export markets. This increases cotton demand and helps push up the price of cotton.
Indications are that the cotton price this March is going to be steep when the peak arrival season ends in India. Overall, the agriculture market is expected to be bullish in the coming months.
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