Cotton arrivals drop 35% as farmers await better price

Cotton production expected to increase, prices drop from beginning of season

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Even as India’s cotton production is forecast to be on the higher side this year, arrivals of the crop have remained 30-35 per cent lower compared to a year ago. This is because farmers are unwilling to sell at the prevailing price levels.

Against the daily arrival of 210,000-225,000 bales (each of 170 kg) last year same month, this time it was 160,000-170,000. In Gujarat, the largest cotton-producing state, those were 55,000-60,000 bales, against 85,000-90,000 a year ago.

“Delay in season is also a reason for lower arrival in the country,” said Arunbhai Dalal of Arun Kumar & Company from Ahmedabad.

Experts said farmers are demanding Rs 1,000 a 20 kg, and they are ready to wait for the prices to reach the level.

Prices have fallen from the peak of Rs 48,000 a candy (equal to 356 kg) in the beginning of the season to Rs 38,500-39,000. The prices have dropped Rs 9,000 a candy since the beginning of the season due to higher crop projection and weak demand. Raw cotton, or kapas, price was Rs 930-960 a 20 kg in various markets in Gujarat.

According to the Inter-national Cotton Advisory Committee (ICAC), against the price scenario for three seasons, the 2013-14 world production was expected to outpace the world consumption. The 2013-14 world production is projected at 25.6 million tonnes (mt), down 1.2 mt from the last season.

World consumption is forecast at 23.8 mt in 2013-14, up two per cent from last season, with an upward revision of 85,000 tonnes in India from last month.

Globally, too, prices have shown a downward trend. ICAC noted, in its December report, in April, it had projected prices for the current season at 118 cents a pound. But, since then, the prices have plummeted and the current midpoint of the forecast range is 88 cents.

Arvind Patel, vice-president of Saurashtra Ginners’ Association (SGA), said, “Farmers want higher price as their costing has gone up. During sowing and harvesting, the cost of labor, seeds, pesticides have increased.”

Generally, at this time or in month of December, ginners run their unit in two shifts but this year as they are not getting proper supply most of the ginning units operate in single shift. On the demand front, domestic mill demand is also limited and they are buying as per their requirement.

Taking into consideration, the overall situation of cotton production, ending stock, price trend and traders’ reports, the research team of Department of Agricultural Economics, Junagadh Agriculture University (JAU), analysed the historical monthly price data of cotton collected from Gondal APMC.

The econometric analysis of cotton prices and consultation with the NAIP project, Domestic and Export Market Intelligence Cell, Tamil Nadu Agricultural University, Coimbatore, revealed the prices of raw cotton during November 2013 to January 2014 might remain in the range of Rs 920-1040 a 20 kg.

JAU expert said, “Since there is a limited chance for the prices to increase in the near future, it is suggested that farmers may sell cotton upon harvest, without going for storage, taking their own decision.”

Cotton traders and market analysts do not expect cotton prices to increase in near future. The upside trend may start after January 2014 when there is demand in the market.