Cotton prices drop by 7.5pc in last 4 days due to poor demand from yarn mills

Cotton, which was quoted at Rs 40,000 per candy last Thursday, was trading at Rs 37,000 per candy (a candy of 356 kg) on Tuesday, registering Rs 3,000 drop in price, a decline by 7.5 percent per candy over the last four days owing to poor demand from yarn mills and following new arrivals of the crop in state like Punjab.

The decline in price of cotton is attributed demand scarcity in the market. Yarn market is very dull at this point of time, which is a big setback for cotton. Liquidity crunch is also one of the reasons for downfall in cotton price, said Anand Popat, secretary, Saurashtra Ginners Association (SGA).

This year, cotton arrival season is likely to begin late by a month or two in November-December due to delayed monsoon, fresh crop has started arriving in well-irrigated places like Punjab. Estimates put forward by traders suggest daily arrival of 4,000 bales of cotton in Punjab.

According to Arun Dalal, a leading cotton trader from Ahmedabad, arrival of the new crop has started. Though it is slow and quality does not seem to be good enough, it has changed the dynamics of market and as a result, cotton prices have started dropping. In the past two weeks, cotton price has witness decrease by nearly Rs 3,500 per candy.

While, the spinning industry is of the opinion that higher domestic cotton price as compared to international prices coupled with lack of quality cotton worth spinning as well as high inventory have led to decline in demand from yarn mills.

According to a Saurashtra-based ginner, loss incurred last year has forced ginners in evincing least interest in doing forward trading this year. Moreover, there are no export inquiries floating, which may pressurize price of cotton in the coming days.

K Selvaraju of South India Mills Association (SIMA) said that there is drop seen in cotton prices due to the fact that yarn mills already have an inventory of good quality spinnable cotton. Plus, since it is the end of the season, there is no quality cotton available worth spinning and mills are waiting for the new arrival season to begin which is expected late in November-December.

Estimates of low export in the current season have also affected the market situation.

On the cotton exports from India, experts are of the view that in 2014-15 it is likely to decline to 6-7 million bales due to the anticipated poor Chinese demand against previous year, which touched 11 million bales of 170 kgs each in 2013-14 season (October-September).