Poor demand from yarn mills pull down cotton prices by 7.5%

Price of cotton has declined by 7.5 per cent over the last four days owing to poor demand from yarn mills and following new arrivals of the crop in state like Punjab.

Cotton, which was quoted at Rs 40,000 per candy last Thursday, was trading at Rs 37,000 per candy (a candy of 356 kg) on Tuesday, registering a fall of Rs 3,000 or 7.5 per cent per candy over four days.

Attributing the decline in price of cotton to paucity of demand, Anand Popat, secretary, Saurashtra Ginners Association (SGA) said, “There is no demand in the market. Yarn market is very dull at this point of time, which is a big setback for cotton. Liquidity crunch is also one of the reasons for downfall in cotton price.”

While the cotton arrival season will begin late by a month or two in November-December this year due to delayed monsoon, fresh crop has started arriving in well-irrigated places like Punjab. Estimates put forward by traders suggest daily arrival of 4,000 bales of cotton in Punjab.

“Arrival of the new crop has started. Though it is slow and quality is not good enough, it has changed the dynamics of market and as a result, cotton prices have started to go down. In the past two weeks, cotton price has decreased nearly by Rs 3,500 per candy,” said Arun Dalal, a leading cotton trader from Ahmedabad.

According to the spinning industry, higher domestic cotton price as compared to international prices coupled with lack of quality cotton worth spinning as well as high inventory have led to fall in demand from yarn mills.

“Yarn mills already have an inventory of good quality spinnable cotton. Plus, since it is the end of the season, there is no quality cotton available worth spinning and mills are waiting for the new arrival season which will begin late in November-December. This has led to fall in cotton prices,” said K Selvaraju of South India Mills Association (SIMA).

Estimates of low export in the current season has also affected the market situation.

According to a Saurashtra-based ginner, loss incurred last year has forced ginners in evincing least interest in doing forward trading this year. Moreover, there are not any inquiries for export, which may pressurise price of cotton in the coming days.

According to experts, cotton exports from India, which touched 11 million bales of 170 kgs each in 2013-14 season (October-September), is likely to decline to 6-7 million bales in 2014-15 because of anticipated poor Chinese demand.