Cotton Easy, Cloth Decline Continues

Cotton prices ruled easy on the Mumbai market last week. The lack of fresh mill demand at the recent high levels and pressure of selling by stockists caused a reactionary fall of Rs 300-400 per candy. However, sentiment was affected with the advance of monsoon to various producing centres and fairly good rainfall helping the sowing operation. Offerings of new October crop at lower rates also affected the sentiment.

Besides, with the start of monsoon, the quality of cotton slowly deteriorates/ Hence, sellers were keen on liquidating the stocks. Paucity of funds prevented stockists from keeping larger stocks.

The demand from mills too had slowed down due to slackness in the cloth market. For next two months, demand for cloth would be poor. Hence, mills would avail of cotton only for immediate consumption.

The only favourable factor was heavy cotton yarn exports. In view of high prices of cotton and cotton yarn, mills were unable to hike cloth prices due to poor demand. Punjab reported nominal supplies. Hence, prices for Punjab varieties moved in a narrow range. Mills refrained from buying Punjab cotton paying very high prices. Instead, they preferred to make purchases of cheaper Gujarat cotton. According to trade, Gujarat still has unsold cotton stocks of about 6.5-7 lakh bales of which, 3.5 lakh bales are of Shankar-four variety.

In view of very good crop, Shankar-four prices remained reasonable throughout the season and were still Rs 200-300 lower than in the previous season when shortage of Shankar-four was reported due to poor crop position. Cotton consumption by mills would now decline as demand for cotton yarn at higher levels would drop considerably. Mills were already pressurising the Union government not to announce further cotton export quota as they would be deprived of quality cotton.

After rising to Rs 1,825-1,925, Punjab saw gin eased to Rs 1,820-1,900 and F-414 from Rs 2075-2,110 to Rs 2,060-2,090 per Bengal maund. Gujarat kalgagin dropped from Rs 12,700 to Rs 12,250 per candy. Kalyan was traded at Rs 14,400-14,900 and waghad at Rs 12,750-13,000 per candy. Shankar-four was offered between Rs 17,500 and Rs 20,750 per candy.

Cloth: A further slowdown of activity was reported on the Mumbai cloth market last week. Barring a few Calcutta traders seen on the Mulji Jetha market, no other upcountry traders showed interest either in inquiring about prices or the availability of supplies.

Trading activity suffered due to the recent strike by the 'gumastas'. Now, the State Bank of India strike too has aggravated the markets financial position. Upcountry cheques and drafts were pending disposal and to that extent, traders were deprived of the funds for more than a week.

Upcountry centres also reported considerable slow down in activity indicating that the marriage season demand was already over.

Traders are hopeful of good monsoon as rains had already covered South India, Maharashtra, Gujarat and Madhya Pradesh. North India also had pre-monsoon sowers.

So, for the seventh year in succession, the crop outlook would be favourable. Hence, demand for cloth too would be good. However, the next two months would be crucial for the progress of the crop.

Reports from upcountry centres indicated that demand for summer fine and super-fine varieties had ended and traders at upcountry centres were making frantic efforts to clear the stocks on hand. With the end of the marriage season, prices of sarees, suitings and shirtings declined. Rajasthan reported good demand for school uniform with the scheduled reopening of

schools.

However, In Maharashtra and Gujarat, they have already reopened. So, the demand for these varieties had ended.

Calcutta traders were inquiring about the prices and availability of varieties at concessional rates. They were making purchases for the next pooja festival. Calcutta is a prominent centre for cloth supply to Assam, Orissa and East Bengal.

Traders are hopeful that in due course, demand from Calcutta would start and prices will recover. Many mills are already offering cloth at two per cent discount and more on cash basis. Mills are worried about stock pile-up.