Cotton ginning industry faces loss due to weak prices

The cotton ginning industry facing loss of about Rs 8 crore a day on trading roughly around 80,000 bales every day due to weak prices. There are around 4,500 ginning units in the country, almost half of which are not operational at the moment

According to industry estimates, ginners are losing Rs 800-1,000 per bale as cotton prices have fallen by Rs 1,000 per candy to Rs 32,000-32,500 in the last two weeks, while prices of cotton seeds are down by Rs 75 to Rs 400-425 per 20 kg. Given the weak demand, nearly half of the ginning units have not even started operations; many are not expected to commence work until next month.

Gujarat, the top cotton growing state in the country, only 700 of about 1,300 ginnin units are operational this year, down from 1,000 last year at this time. Around 500-600 ginning units are located in North India while Maharashtra has around 1,000-1,100 cotton ginning units.

A bale of 170 kg raw cotton contains nearly 33% cotton lint and 63% cotton seeds while 5% goes waste. At current prices, raw material cost to ginners is around Rs 7,500 per bale, with processing costing another Rs 500. However, as prices are down in the market, the ginners are fetching only Rs 7,000-7,200 per bale as against an investment of Rs 8,000 per bale.

All the major cotton growing states including Gujarat, Punjab, Haryana, Maharashtra, Andhra Pradesh and Rajasthan are facing a similar situation. Ginners in Punjab and Haryana, where cotton production is estimated to be down by over 50% due to damage to the crop this year, have been hit particularly hard. Nonetheless, the lower production in these two states has not pushed up cotton prices, since the northern belt accounts for only about 13-14% of cotton production in the country, with states like Gujarat being the major production hubs.

According to Bhagwan Bansal, president of Punjab Cotton Ginners Association, the ginning industry in North India, especially in Punjab and Haryana, are not doing well as cotton crop in both the states have been damaged badly. At the same time, prices are also not favourable for the business and as result most ginners are not willing to open their units at this time.

Currently, daily arrival of cotton has touched 125,000 bales per day. Arrival in Gujarat has reached around 45,000-50,000 bales per day.

Bharat Wala, president of Saurashtra Ginners Association (SGA) said that higher arrival of the new crop has brought the prices of cotton and cotton seed. Moreover, demand for cotton from exporters and yarn mills is also below normal. All these factors combined have created disparity for ginners in this season. They are losing around Rs 800-1,000 per bale.

As per market sources, as on October 31, about 2.20 million bales of cotton arrived in the market and till the date one million bales of export registration have been done mainly for Bangladesh, Indonesia, Vietnam and Pakistan.

According to Arvind Pan, managing director of Jaydeep Cotton Fibres Private Limited, the export demand likely to pick up in December. Arrival of the quality cotton will also pick up after Diwali and prices are expected to stabilize.