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Raw cotton prices on downward spiral
Jul '11
Raw cotton and in particular Shankar-6 prices – the most exportable cotton variety from India have plunged in the last three fortnights.

Shankar-6 prices which stood at Rs 45,500 per candy (1 candy = 356 kg) on June 1 have plummeted to Rs 33,750 per candy on July 15, down a massive 25.82 percent.

Infact they started falling beginning from April. After having touched a peak of Rs 63,000 per candy, cotton prices started moving southwards.

In the last 10 days alone, Shankar-6 prices have dropped by more than 11 percent.

The main reason for the same is the slowdown in demand for the white gold. Spinners across India are carrying high inventory levels of yarn, produced from cotton, bought at peak prices.

Since cotton prices have fallen, this has also resulted in a fall in yarn prices, at which, spinners can ill afford to sell, considering the high production cost of the yarn lying in their godown.

Closure of over 1,000 dyeing and printing units in Tirupur on orders from the Madras High Court too has resulted in low off take of yarn by powerloom factories.

Yesterday, the 600 member strong - South India Spinners Association (SISPA) have halted yarn production, to reduce yarn inventories, initially for a 10-day period.

This is the second mass closure in 60 days. Earlier on May 23, spinners across India had pulled down shutters for a day. In addition, production was also cut for the next 7 days, to reduce yarn inventory levels.

The way, cotton prices had more than doubled in the current cotton season, when compared with the previous season, coupled with slowdown in demand, a correction in the prices was inevitable.

Click here to view and download Shankar-6 cotton price trends.

Fibre2fashion News Desk - India

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