Cotton prices in India witnessed fall to lowest levels this year

Almost zero forward deals with exporters seen this season as China reduced its imports from India, record-high acreage as well as cotton production, along with dull demand from mills has resulted in fall in cotton prices and it will be the lowest in last one year.

Cotton prices have fallen to the lowest levels in the current cotton year (October 2013-September 2014), at Rs 33,000-34,000 a candy (356 kg). Demand for cotton in terms of exports will also be low.

According to sources, going forward, Cotton Corporation of India (CCI) might have to buy the commodity from cotton growers at minimum support prices (MSP), which works out to Rs 35,000 a candy for long staple and Rs 32,500 a candy for medium staple.

In this, the lowest prices of the Shankar-6 variety of medium staple cotton is in Gujarat at Rs 33,500 a candy, down from Rs 38,000 a month ago.

According to J Tulsidharan, president, Indian Cotton Federation (ICF), mills are yet to plan bulk buying since they are still carrying huge inventory of the previous year’s cotton. Also, the arrival this year is set to be delayed by a month or two. Hence, low demand coupled with anticipated high supply is driving down cotton prices to the lowest levels of the year.

Breaking all previous records, this year, the area under cotton cultivation in India has reached a record high of 12.5 million hectares. Last year, the area under cotton cultivation stood at 11.7 million hectares.

The all-time high cotton acreage is all set to push India’s cotton production to a new level. In fact, cotton traders and ICF estimate a record harvest of 40 million bales (one bale is 170 kg).

However, arrivals are expected to delay by a month or two due to delayed monsoon, resulting in delayed sowing wherein bulk arrivals are expected by December.

Currently 35,000 bales are arriving daily in various mandis in many parts of the country. The arrivals are likely to pick up to 200,000 bales a day after Diwali.

While, K Selvaraju of South Indian Mills Association said that the initial arrivals have too much moisture and are not of spinnable quality. The demand is low and is expected to remain so for another month, because good quality cotton is only expected to come in by late November or early December. Currently mills are already having inventory from last season’s stock.