Cotton prices likely to come under pressure as less demand & economic slowdown

With demand reducing amid a slowdown in the global economy, cotton prices in the `international market are set to come under pressure, experts have said. “There is no demand for yarn from the spinning mills. They are losing about ₹30-­40 a kg in yarn sales. But stocks are limited with them. This is stopping the price from falling at the pace it should have been,” said Anand Poppat, a Rajkotbased trader in raw cotton, yarn and cotton wastes.

In contrast, Indian Shankar­-6 cotton, the benchmark for exports, is priced at around ₹95,000. On the Multi ­Commodity Exchange, the July contract is priced at ₹46,330 a bale of 170 kg (₹97,020 a candy). “There are neither buyers nor sellers at these prices,” said Poppat. Usually, Chinese cotton prices rule higher than Indian cotton rates. But now they are ruling lower than the Indian price. It is a fair indication of how things will pan out over the next few months, he added.

FSCRIR said the increased price for cotton has increased producers’ confidence, leading to higher cultivation globally. In China, government initiatives will also provide confidence to growers. “We are confident of cotton prices correcting to normal levels in the upcoming cotton season,” said Dhamodharan, Convenor, Indian Texpreneurs Federation (ITF).

The other factor that could impact prices is that nearly 121,015 U.S. cotton bales have been sold by traders in short
positions. The feature of “on call sales” is that a buyer purchases cotton from a seller or speculator without fixing the price and buyers usually look to settle the contract when prices rule low.

Meanwhile, 9.5 lakh tonnes of cotton have been imported till now. The Central Government has allowed the import of cotton duty-free until September 30 to help the industry get quality cotton and tide over the supply issues.

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