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Indian cotton prices rises during peak cotton arrival season

Prices of Indian cotton saw an unusual rise during the current peak arrival season. While, cotton production all over the world was on the rise, the situation in India is getting serious attention due to steady rise prices. Spot prices of Sankar-6 and MCU-5 varieties range from about Rs 42,500 and 44,000 respectively per candy.

Currently, it is the peak arrival season of cotton in India but arrivals have been lagging behind what it was during the same period last season. While flowering was not good, weather could not be blamed as it has been reasonable for cotton during the growing season. The volatility has been attributed primarily to trading issues and Indian government’s recent banknote demonetisation policy.

A few from cotton marketing, purchasing and spinning expressed the same reasons for sudden increase in cotton prices. The general manager of a 65,000 ring spindle mill in South India stated that his company procures about 40,000 bales (170 Kgs each) of cotton each year at an overall price tag of about Rs 60 crores (Rs 600 million). The variation of about Rs 1000 per candy in a day can result in lot of economic upsets for mills in India. Since December, the price has increased by about Rupees 4,000 per candy.

Arrivals have been about 150,000 bales per day (1.5 lakhs bales per day), which is less by 50,000 during the peak arrival timeframe. Normally, the arrivals are about 200,000 bales per day (2 lakhs bales per day). The view from spinning mills is that yarn prices are stable and there is demand for yarns and made-up goods such as bedspreads in export markets. This increases the demand for cotton and hence there is increase in the price of cotton.