Higher demand and lower arrivals push cotton prices

Fall in rupee against dollar has also motivated exporters, textile mills leading to growth in cotton demand

Increased demand from mills and exporters led to a rise in cotton prices last month, by Rs 2,500 a candy (356 kg). According to industry sources, restricted selling by farmers was one reason. Prices moved up from Rs 38,300-38,500 a candy to Rs 40,800-41,000.

“Thanks to improved export, there has been a heavy rise in demand from domestic mills. To create stock, domestic yarn mills also bought cotton in large quantities during December,” said Arun Dalal of Arun Kumar & Co, a leading cotton trader from Ahmedabad.

The rupee’s fall against the dollar also motivated exporters and textile mills, sparking growth in demand.

“Nearly 10 million bales (a bale is 170 kg) of cotton have arrived in the market and approximately 27.5 mn are yet to arrive,” said Dalal. He says prices could decline in the near future, owing to reduction in demand after arrivals.

Bachubhai Antrolia, vice-president at Saurashtra Ginners’ Association said cotton arrivals were still limited due to farmers wanting a higher price. “Farmers are holding on to stocks,” he said.

Against the daily arrival of 210,000-225,000 bales (each of 170 kg) in December 2012, it was 180,000-190,000 bales for the same month in 2013. In Gujarat, the largest producing state, it was 60,000-65,000 bales as against 85,000-90,000 in the corresponding month a year before. According to a cotton broker here, daily arrivals in Gujarat are 65,000-70,000 bales, with 22,000-25,000 bales of these coming from Maharashtra.

As on November 7, the Cotton Association of India’s latest estimate of the crop for the 2013-14 season was 38 mn bales, with consumption likely to be 30 mn. Gujarat has seen an increase of 10 per cent in sowing, on the back of a good monsoon compared to the drought conditions in 2012-13. All other growing states have also got good rainfall this time, as against a below-par one in 2012-13.

Market sources say export registrations from India so far are 4.5 mn bales, of which 3.3 mn have been shipped.