Indian Cotton Mills Federation (ICMF), realising the situation, has convened a meeting of its members on November 6 to discuss the strategy to combat the impending crisis.
Barring Bengal-desi (new crop) and DCH-32 (new crop) grown in Karnataka cotton prices are on rise, despite a bumper crop this year. Even in the international market, Cotlook A Index has touched further highs in October 30, 2003 as against the averages of 58.50 in June, 60.21 in July, 60.50 in August and 64.18 in September.
According to the initial official estimate, cotton production in 2003-04 is likely to increase by 40.9 per cent to be at 13.12 million bales of 170 kg each as against 9.31 million bales in the previous year.
Speaking to FE, DK Nair, secretary-general, ICMF, said, The phenomenal rise in domestic cotton prices are linked to global trends. Cotton output has been good in the country this year and this should not cause a rise in prices but prices may be high due to a possible increase in exports of cotton.
There are reports that cotton exports may touch three lakh bales this year as against 50,000 bales exported last year. Exporters are taking advantage of the rising prices for making a good earning.
Mr Nair said that the current situation was good for cotton exporters as they can procure cotton in the country at a comparably low rates and export at higher prices. He said that possibly the booking of large export orders might be a cause for a rise in domestic prices and added that there might also be a possibility of hoarding by traders for creating artificial shortage and consequent rise in prices.
As regards the global price rise, Mr Nair said that this was due to the rise in global consumption and a lower estimate of ending stocks. According to the Washington-based International Cotton Advisory Committee (ICAC), the global production of cotton in 2003-04 has increased to 20,486 tonne as against 19,142 tonne in the previous year.
But the global consumption of cotton estimated by ICAC is likely to increase to 21,233 tonne as against 20,963 tonne in the previous year and this would result in a lower carryover stock at the end of 2003-04 ie at 8,040 tonne as against 8,786 tonne in the previous year, he said. Mr Nair attributed another cause for the rise in global prices. He said that China has entered the global market as an importer. He said that whenever India or China enters global market as an importer the price rise is imminent.
He regretted that in such a pertaining situation the industry has to bear the burnt as no matching rise in prices of value-added products like yarn, fabrics of garments are not yet noticed in either in the global or in the domestic market.
Meanwhile, as on October 14, 2003, the price of V-797 cotton (old crop) was Rs 19,205 per candy in Mumbai as against the average price of Rs 16,370 per candy in 2002-03 and Rs 12,110 per candy in 2001-02. Similarly, the price of J-34-SG cotton (new crop) was Rs 22,050 per candy as against the average price of Rs 21,220 per candy in 2002-03 and Rs 16,040 per candy in 2001-02, the price of Y-1 (old crop) was Rs 22,275 per candy as against average price of Rs 19,570 per candy in 2002-03 and Rs 14,690 per candy in 2001-02, the price of LRA-5166 (old crop) was Rs 23,030 per candy as against average price of Rs 21,265 per candy in 2002-03 and Rs 15,515 per candy in 2001-02, the price of NHH-44 (old crop) was Rs 22,705 per candy as against average price of Rs 20,745 per candy in 2002-03 and Rs 15,030 per candy in 2001-02, the price H-4-Mech/1 (new Crop) was Rs 24,455 per candy as against the average price of Rs 22,235 per candy in 2002-03 and Rs 17,420 per candy in 2001-02, the price of Shankar-6/4 (new crop) was Rs 25,115 per candy as against the average price of Rs 23,130 per candy in 2002-03 and Rs 18,560 per candy in 2001-02 and the price of MCU-5 (old crop) was Rs 27,410 per candy as against the average price of Rs 26,685 per candy in 2002-03 and Rs 21,630 per candy in 2001-02.