Cotton prices to increase 7%

Cotton prices are likely to increase by 5 to 7 per cent in the next few months on the back of a rising demand and the world output declining by 3 per cent, according to traders. Exports of cotton, which resumed after almost a two-month gap, will also boost the prices.

"The prices of cotton, including desi and BT, are likely to go up in the next few months. The prices will get stronger by 5 to 7 per cent and this trend will last till the December-end. At present, BT cotton prices are Rs 19,500-19,800 and desi cotton quotes between Rs 15,400 and Rs 15,800 a candy (3.5562 quintals)," said Arun Dalal, an Ahmedabad-based cotton trader.

Gujarat-based cotton traders see a bullish sentiment over the next few months, with various elements impacting the prices. In 2006-07, the state had registered a record output of 1.3 crore bales (a bale equals 170 kg) in addition to 3.5 lakh bales of carry-over stock from the last year.

The country produced around 2.73 crore of bales during the same period.

"The international demand and supply situation will be the major driver. The demand-supply gap is increasing as the demand for cotton is steadily growing at 4 per cent, while the supply is decreasing by 3 per cent at the global level. This gap as well as an increasing demand from the domestic textile millers will also be a price-driving force," added Dalal.

Another price-booster will be the resumed exports after almost two to three months of lull because of an appreciating rupee.

"The prices are certainly going to shoot up by 5 to 7 per cent as demand from the international market is increasing and the exports, which had stopped for almost three months following a strong rupee, have resumed again," said Dilip Patel, one of the major cotton traders of Kadi in Mehsana district and owner of Raja Industries. Cotton in the Kadi market quotes around Rs 19,400 a candy.

The country's exports till date this year were 55 lakh bales, with Gujarat accounting for almost 40 lakh bales.

The exports were likely to rise by 1.5 lakh to 2 lakh bales by the end of this season to around to 57 lakh bales, said Dalal. According to the Union ministry of textiles, the country exported 47 lakh bales in 2005-06. The country produced 2.73 crore bales, including BT cotton, this year and around 3.5 lakh bales were carried forward from the previous year.

The state's production went up from 30.5 lakh bales to 89 lakh bales between 2002-03 and 2005-06 respectively and rose by 100 lakh bales in 2006-07 to touch 1.3 crore bales.