Cotton prices have started rising the past one week due to lower production estimates this year, following reports of crop damage on erratic rainfall and pink bollworm attack on standing crops in major growing regions.
Data compiled by Agmarknet.in showed raw cotton prices in Warangal mandi surged by 7 per cent the past 10 days to trade on Wednesday at Rs 6,225 a quintal from Rs 5,800 a quintal earlier. The price rise in other mandis has been quite similar. In fact, in Gondal (Rajkot, Gujarat) mandi, raw cotton prices surged sharply to trade at Rs 6,380 a quintal on Wednesday.
“Cotton prices in the domestic market have started moving up on crop damage following erratic rainfall and reports of pink bollworm attack. While the assessment of crop damage is yet to be ascertained, prices will certainly react to the production estimates from the standing crop. In the international market, cotton continues to trade lower on US-China trade war,” said Ravindra Rao, Head of Research, Kotak Securities.
Cotton sowing was impacted earlier due to a three-week delay in the onset of the monsoon this season. This was followed by a continuous downpour in major growing regions that flooded cotton field. Analysts have also forecast intermittent pink bollworm attack on the standing crop, which could pull down output this year.
Data compiled by the Union Ministry of Agriculture showed a 5 per cent increase in total sowing area at 12 million hectares by September 13, 2019 compared to 12.6 million hectares, same time last year.
Raw Cotton prices have turned around from below the minimum support price (MSP) of Rs 5,150 a quintal three months ago, due primarily to a surge in mills’ demand. According to Arun Sakseria, a cotton trader and exporter, lower output last year and delayed arrivals this year have helped cotton price rise.
Rising cotton prices are likely to compund the woes of spinning mills, which have been facing weak demand from China and Bangladesh, which buy over 75 per cent of India’s cotton yarn.
“Spinning mills have already shut 25-30 per cent of their production capacity due to weak Chinese demand. Rise in cotton prices would hit the remaining operational capacity and force them to shut,” said Suraj Jyoti, proprietor of Excel Enterprises, a Ludhiana-based cotton spinner.
Meanwhile, rising cotton prices have raised hopes for further increase in the use of manmade fibre (MMF) in the Indian textile industry. In fact, the use of MMF has gradually increased over the last few years.
“Shortage of cotton yarns and high prices are major factors which led to better demand for polyester yarns in the domestic markets. Moreover, domestic manufacturers of polyester yarns has been able to increase their capacity utilisation as the anti-dumping duty imposed on China led to pick-up in demand for domestic yarn compared to imported yarns,” Madhu Sudhan Bhageria, CMD, Filatex India.