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Rising demand from local firms to impact cotton prices
Jul '10
Despite increased harvest this summer, traders are hoping for cotton prices to increase. Shankar-6 variety is being sold at Rs 30,200 per candy as compared to Rs 29,500 a candy, recorded last month.

During the onset of the season, cotton prices registered an upward trend, which by now has come to a stable point, owing to ban on exports. In the domestic market, cotton is being traded in the price range of Rs 30,000-31,000 and traders are hoping for the prices to remain constant till atleast September.

Ban on cotton exports did not impact the prices, as there was a constant rise in the demand from local firms. More than 100 new textile firms have developed in Andhra Pradesh, which has resulted in increased demand for cotton.

Gujarat government, on the other hand, has levies a cess on cotton, which is sold out of state, owing to which cotton prices have surged by around 2 percent. Tamil Nadu, which totals for close to 45 percent of the overall spinning capacity of the nation, is the largest purchaser of Gujarat cotton.

Industry is hoping that, for 2010-11, cotton arrivals will be about 31-32.5 million bales. During 2009-10, arrivals had managed to match the Cotton Advisory Board's anticipated figures of 29.2 million bales. However, cotton arrivals in Tamil Nadu fell behind by 1.8 lakh bales from the earlier estimated figure of 5 lakh bales.

Till the end of June, 5.7 million cotton bales have reached the market in Andhra, of which 1 million bales were exported to countries like Pakistan, Myanmar and China. By September, traders are hoping for additional 1-2 lakh bales to reach the market.

As per traders, the season's good cotton prices will persuade more farmers to grow cotton. More over, cotton quality is also good as many farmers have adopted Bt cotton cultivation, which is more profitable as the crop does not take in more water, thus, helping farmers reduce their input cost, informed a cotton trader.

Although, the yearly local demand in India was fixed at 26 million bales till September 30, this year, the government has allowed exports of 8.523 million bales. Rising prices at the far end of the season, is an indication that the terminals markets are hoarding very less stock, informed an expert.

Hence, averred another expert, government should wait for additional 6-8 weeks to determine the size of the crop and accordingly price trends for the coming season.

Fibre2Fashion News Desk - India

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