Indian cotton output to be 39mn bales this season: SIMA

01 Aug '14

6 min read

Mr. Rajkumar stated that India could achieve a record crop of 390 lakh bales in the current cotton season and therefore, the prices were stable from the beginning of the season but for the recent hike, which is unwarranted. The country could export around 112 lakh bales of cotton during the current season. He said that the slowdown in the international market and the cotton policy announced by China during the beginning of the year had slowed down the export performance of the spinners and weavers in the country. He viewed that the readymade garments could perform better when compared to other sectors.

Mr. Rajkumar advised the mills and the manufacturers across the cotton textiles value chain not to be panic with the temporary sluggishness in the market. He has stated that there is a significant drop in the ICE futures prices for December cotton delivery due to anticipation of higher cotton crop in US in the current season and slow down in the Chinese imports. The ICE futures price is only for 11/32” cotton which is used as the base price for hedging purpose only and the actual prices of cotton carry a premium between 15 and 20 cents and therefore, the shipment price of 11/8” cotton for prompt shipment ranges from 86 to 95 cents depending upon the country of origin.

SIMA Chairman has stated that the fluctuations in ICE futures do not reflect in the actual physical cotton deliveries from various countries of origin. He has stated that usually the price difference between ICE rate and West African cotton rate used to be 6 to 7 cents premium over New York futures and whereas now it is about 17 to 18 cents. He has further stated that for Australian cotton it used to be 14 to 15 cents over New York futures and now it is 21 to 28 cents premium over New York futures for the same quality.

Mr.Rajkumar has stated that though the quoted domestic cotton price for Sankar-6 is well below the rates mentioned above, they are suitable to produce only inferior quality yarn with low productivity. Even today, good quality cotton price has not come down and continue to rule higher than the international prices. He has hoped that the cotton prices in the domestic market might match with the international prices in the coming days bringing stability in the cotton prices.

SIMA Chairman has observed that the market sentiments across the value chain has started improving immediately after the announcement of Union Budget 2014-15 mainly due to the extension of optional Cenvat route and also various transparent policies. The enquiries for yarns and fabrics have started improving due to increased demand for the finished goods particularly garments and made-ups as the festivals are fast approaching. Mr. Rajkumar said that the textile mills also had a liquidity problem during the last quarter due to long standing arrears of TUF subsidies from the Centre. The new NDA government has started releasing the funds and therefore, the liquidity has started improving, he said.

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