Textile mills postpone cotton buying

International cotton prices are at five-year low

Amid reports of a fall in cotton sowing this season, textiles mills and spinners are taking a wait-and-watch approach to stocking the commodity, as they feel supply will improve and prices will fall in a couple of months, when the new crop arrives.

Globally, cotton prices have fallen to a five-year low.

In a report, International Cotton Advisory Committee (ICAC) said, “Though the monsoon has arrived in India, the volume of precipitation has varied widely and yield is likely to suffer in some places.” The committee has estimated India’s cotton crop will fall about 10 per cent this year. ICAC and the US department of agriculture (USDA) have pegged India’s 2014-15 cotton production at about 35 million bales.

The ICAC report says in 2014-15, there will be a sharp fall in cotton exports, “primarily driven by a 26 per cent fall in imports by China at 2.2 million tonnes. It is likely India’s exports will fall to 800,000 tonnes, less than half the exports in 2013-14”.

The fall in exports is likely to make good the drop in production and, as global demand is slack, demand for yarn could also fall.

Yarn spinners have preferred to wait, as stockpiling has already started due to a fall in exports. “We have sufficient cotton stocks to last till the next cotton season starts; we will only start buying cotton from the market from October, as the price of cotton will fall further till then,” said S P Oswal, chairman and managing director of Vardhaman Group.

Oswal expects cotton yarn exports to be 20-25 per cent lower than last year, as China, the largest importer of Indian cotton yarn, has cut purchases. Last financial year, exports of cotton yarn stood at 1,414.53 million kg, while in 2012-13, it stood at 1,109 million kg.

The ICAC report says, “The Chinese government will close 2013-14 with sales of 2.3 million tonnes (mt) of cotton, 37 per cent of the 6.3 mt purchased this season. As this is the second successive year in which total purchases by the government exceeded sales, government stocks have increased and are estimated at 11.4 mt. Stocks in China stand at 11.9 mt. Global stocks, excluding China, have risen six per cent to 8.6 mt, the most since 20070-08, when it stood at 8.8 mt, and this is weighing on prices.”