The Cotton Association of India (CAI) estimated this year's yield to be 33.55 million bales (170 kgs each) which is approximately 550,000 bales higher than its previous estimate.
As the cotton prices drop significantly during the months of January and February, the lack of full capacity utilization in the spinning mills will only add to the cotton stocks which could lead to a heavier price drop.
The CAI predicts a carryover of 5.5 million bales of stock. Velmurugan Shanmugam, general manager of Jayalakshmi Textiles, based in Aruppukottai, India states that the COVID-19 has reduced the consumer purchasing activity which meant that it was the main reason for the lack of uptick in the spinning sector. That particular mill has 72,000 ring spindles and produces finer counts catering to sheeting materials and men’s wear fabrics.
Mills, in general, keep four months of stock, the mills in India however procured cotton in February when the price for 30-mm cotton was 40,000 rupees(356kgs). The drastic drop in cotton prices has evoked stress in the industry.
Due to the lack of demand, the spinning and other textile industries are facing problems paying interest against working capital which is adding uncertainty and stress.
Shanmugam stated that the textile sector should use the COVID-19 as an awakening and work towards enhancing its mass production capabilities and its product depth. He also states the industry requires value addition and new applications of cotton.
The cotton and yarn prices all depend upon what consumers do within the next few weeks.
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