Prices of domestic cotton have declined below 70,000 per candy (356 kg/candy) in the current calendar year for the first time in anticipation of a bumper cotton crop and sluggish export demand.
Just a month ago, the prices were hovering around `90,000 per candy. At present, cotton prices are around `65,000 to `68,000 per candy in the domestic market but are still higher compared to international prices, said Atul Ganatra, president of the Cotton Association of India (CAI).
“Cotton rates of December future was around 83% (approximately `56,000 per candy) at the US-based International Exchange (ICE). We are expecting prices of cotton to further go down by the arrival of 2023 and it may also break the`60,000 per candy barrier,” said Ganatra. He believes that the declining trend in cotton would be a good sign for spinning and composite textile mills. A large number of closed spinning units are likely to open post-Diwali as there would be adequate availability of cotton at an affordable rate, he added.
“Though cotton prices are going down, export orders are not being generated in good numbers. Some of the big global players based in the US and UK markets are still experiencing higher inventories. Hopefully, they would be able to empty their inventories in Christmas festivities,” said Chintan Thaker, head of Corporate Affairs and Strategic Planning at Welspun Group as well as chairman of Assocham Gujarat.
Gautam Dhamsania, secretary of Spinners Association – Gujarat (SAG) says that since August this year, the majority of 120 spinning units are either closed or running at below 50% capacity due to higher rates of cotton and a shortage of quality raw materials. “We are expecting the arrival of quality cotton in large quantities by the last week of October in Gujarat and Maharashtra-based markets. Already there has been good income from raw cotton in the mandis of Rajasthan and Haryana. Above all, prices too have decreased and inquiries from textile mills have started coming,” said Dhamsania.
Spinners are getting inquiries from overseas buyers, but these inquiries are not being translated into order due to overall sluggishness in the international market, he added. Cotton prices are expected to settle around `65,000 per candy by mid-November as the arrival of cotton in the mandis would be at its peak and at the same time there would be bulk buying from ginning, spinning and fabric manufacturing units, said Avdhesh Sejpal, All India Cotton, Cotton Seeds and Cotton Cake Brokers Association.
Cotton Corporation of India (CCI), which carries out cotton procurement operations at minimum support price (MSP) when prices fall below MSP, has pegged India’s 2022-23 season cotton production at nearly 36 million bales (170 kg per bale). In 2021-22, the cotton crop was nearly 31.5 million bales. Domestic cotton prices inflated from nearly `60,000 per candy in January 2022 to as high as `1.10 lakh in May 2022 due to unprecedented global demand for the commodity. As a result of this, many farmers in cotton-growing states shifted to cotton from other crops in major cotton-producing states, especially Gujarat and Maharashtra. Consequently, the area under cotton has increased to 12.8 million hectares (MH) against 11.7 MH in the previous year.
Maharashtra, Punjab, Haryana, Rajasthan, Madhya Pradesh, Karnataka, Andhra Pradesh, Telangana and Tamil Nadu are the major cotton-producing states in India apart from Gujarat. Acreage under cotton sowing in Gujarat has increased by almost 0.3 MH to 2.55 MH compared to last year’s 2.25 MH. Gujarat has a lion’s share of around 30% of the country’s total cotton production.