Cotton prices have declined by almost 9 per cent previously two weeks as growers have begun to deliver their produce they’d held back over the previous few months to the agricultural produce advertising and marketing committee (APMC) yards.
“Farmers in varied States have modified their minds and wish to promote their stocked kapas (seed cotton). Arrivals of kapas in May are at a brand new excessive and are anticipated to proceed till the tip of June,” mentioned Anand Popat, a dealer in cotton, yarn and cotton waste from Rajkot.
“Daily arrivals of cotton have elevated to at least one lakh bales (170 kg every) over the previous few days. Demand for yarn is negligible and its exports have been affected by the recessionary pattern. Demand for fabric too is slack,” mentioned Ramanuj Das Boob, who sources cotton for spinning mills, multinational firms and exporters from Raichur, Karnataka.
Panic strikes?
According to information from Agmarknet, a unit of the Agriculture Ministry, cotton arrivals are at a 9-year excessive of 1,82,572.67 tonnes (10.73 lakh bales) thus far this month. In 2014, when India produced a document excessive crop of 398 lakh bales, arrivals in the identical interval have been 2,36,800.48 tonnes (13.93 lakh bales).
“Daily arrivals of kapas ranged 90,000-110,000 bales per day final week, with complete arrival being 7 lakh bales,” mentioned Popat.
“Panic has struck the market. There is not any demand for yarn or fabric. No one is shopping for cotton too. Production appears to be in extra,” mentioned Sachin Jhanwar, a yarn processor.
“Due to sluggish demand persevering with throughout the worth chain, cotton prices are moderating according to the identical pattern,” mentioned Prabhu Dhamodharan, Convenor, Indian Texpreneurs Federation (ITF).
Hoping for extra
Currently, the value of processed cotton (lint) is ₹56,900 a sweet (356 kg) in contrast with ₹62,200 two weeks in the past. On the Multi Commodity Exchange, June cotton contracts are presently quoting at ₹58,120 a sweet.
Kapas prices at Rajkot APMC are ruling at ₹7,175 a quintal, down from ₹7,950 two weeks in the past. On the InterContinental Exchange (ICE), New York, cotton July contracts are ruling at 84.27 US cents a pound (₹56,625 a sweet).
Cotton growers had held back their produce and saved it within the backyards and on terraces this yr hoping for prices to extend. They have been unwilling to promote even when prices dominated at ₹8,000 a quintal towards the minimal assist worth of ₹6,080 as they received prices over ₹10,000 final season.
Growers in Karnataka and Maharashtra held back their produce for the primary time aside from Gujarat farmers who often maintain back their produce for the lean arrival season beginning April.
“While cotton prices have dropped to the degrees of ₹57,000 in India, they’re ruling at ₹67,000 in China,” mentioned Jhanwar.
Difficult to evaluate crop
“There is a few parity in prices for export. It will begin choosing up now,” Popat mentioned. So far, 11.50 lakh bales of cotton have been exported and shipments are anticipated to plunge to 19-year low of 23 lakh bales this season to September.
“Since final week, the ICE market has been ruling robust even as Indian cotton prices have been declining every day. On MCX, too, the bearish pattern prevails,” mentioned Das Boob.
“We must try to enhance exports to 30-35 lakh bales if the state of affairs has to vary,” Jhanwar mentioned.
“Across the worth chain, textile firms are working at lesser capability utilisation ranges. Hereafter, cotton prices will align with actual demand elements like attire exports,” Dhamodharan mentioned.
“Looking on the present arrivals pattern, it’s troublesome to evaluate the crop primarily based solely on the influx into APMC yard and kapas held back by farmers in Maharashtra and Gujarat,” Das Boob mentioned.
This may even make it troublesome to foretell the amount of cotton more likely to arrive as ginners and merchants are holding big stocks of 30-35 lakh bales, he mentioned.
MNCs constructing inventories
The Committee on Cotton Production and Consumption, a physique of all stakeholders, has estimated the crop for the present season (October 2022-September 2023) at 327.23 lakh bales however a piece of the commerce pegs it greater at over 340 lakh bales. However, the Cotton Association of India, a physique of merchants, has pegged it decrease than 300 lakh bales in its newest estimate made this month.
Jhanwar mentioned many have been carrying cotton and yarn stocks that have been over a yr previous. “I’ve been holding a very good amount of yarn and a lakh bales of cotton since final yr,” he mentioned.
Das Boob and Popat mentioned presently, multinational buying and selling firms have been shopping for cotton. “Spinning mills are having cotton stocks for 45 days. Cash-rich mills are having stocks for 70-90 days,” Das Boob mentioned.
“The state of affairs seems beneficial for these buying and selling corporations which had bought within the ahead market and are actually masking stocks. The worth drop helps them too,” mentioned Popat.
Sowing could rise
“Over the following three months, we may witness some portions of cotton being imported from Australia, Brazil and the US,” mentioned Das Boob.
“The market developments this week can be essential after which the main focus can be on the US,” Jhanwar mentioned.
“We are witnessing some pockets of restoration in some dwelling textile merchandise as a consequence of exhaustion of stock with retailers. At the identical time, we expect a gentle state of order movement for apparels which is a big portion of our export basket from October,” Dhamodharan mentioned.
Despite the drop in prices, cotton sowing will enhance this yr, although mills will possible curb manufacturing within the months to come back if the present pattern continues, Das Boob mentioned.