Cotton prices in India may decline next season: Report

03 Jan '14

2 min read

Post cotton season 2013-14, cotton prices in India are likely to decrease as demand slumps, says the latest DHL India Trade Outlook.

The report says China is likely to discontinue its policy of procuring cotton at a minimum support price that is higher than the prevailing global average, thereby affecting India's yarn exports, which will translate into lower demand for cotton yarn, and hence cotton.

In the previous cotton season 2012-13 that ended on September 30, 2013, domestic cotton prices in India averaged Rs. 107 per kg, nearly 6 percent higher than the previous season’s average.

“This increase was on account of a sharp rise in prices towards the end of the cotton season. Prices, which averaged Rs. 100 per kg during the first eight months, rose above Rs. 120 over the subsequent 4 months. The continuing robust demand coinciding with low stocks during the season-end pushed up prices,” states the report.

CRISIL Research expects domestic cotton prices to rise to Rs. 115-120 per kg in the current season, as strong yarn demand leads to cotton consumption exceeding production levels.

During the ongoing cotton season, India's cotton production is projected to increase by 5-7 percent, mainly driven by higher productivity. Average yield levels, which fell in 2012 on the back of erratic rains, are expected to improve as the monsoon in 2013 has been good and timely, according to the report.

It expects cotton mill consumption to increase by 9-10 percent, on the back of continuing strong demand for cotton yarn, which will reduce the stock-to-use ratio to a decadal low.

Among key developments, the December 2013 report points out that the Cotton Corporation of India will open 91 purchasing centres in Andhra Pradesh for the 2013-14 season. These centres will buy cotton damaged in the recent cyclones and floods, besides procuring cotton from other parts of the state.

Another key point is that textile manufacturers are looking forward to sourcing cotton at lower rates and passing on the benefit to buyers, as the Cotton Association of India has pegged India’s cotton production to rise to 38 million bales this year.

Fibre2fashion News Desk - India

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