Cotton demand remains sluggish

16 May '06

2 min read

At a time when prices of major commodities are hitting the roof, cotton seems to have taken the opposite trend. Prices of almost all major cotton varieties have fallen in recent times and market is going though a rather weak phase.

Prices of Extra Long Staple (ELS) DCH-32 prices which went up in November last year, has remained flat for more than a month.

Cotton prices usually go through lean phase during March-May period, but there is an unusual sluggishness in volumes and price movement, industry players opine.

Prices have gone down on an average by more than Rs 300 for Shankar varieties and Rs 500- 600 per candy (355.62 kg) for others during past one month.

Sluggishness in yarn market and poor export demand are reasons for the trend, said industry players.

“This has caused delays in the funding cycle. As a result, the market is facing liquidity problems,” said A Ramani, cotton analyst and joint secretary of South India Cotton Association (SICA).

Cotton arrivals in Gujarat are around 17,000 bales (170 kgs each), but there is a lack of buying interest, trade sources said.

Mills have adequate cotton stocks and would become active only if they get depleted, they added.

Cotton export too is lagging behind. China, a large buyer is yet to release any fresh quotas for importing cotton and exports to other destinations have suffered due low cost cotton available from the US.

With a projected production of around 240 lakh bales and a carryover stock of more than 70 lakh bales, the country is comfortably placed.

“Prices may soften in the near term. But we do not expect any huge fluctuations. The excess consumption may reduce the carryover stock. But cotton availability would be enough to meet the demand,” the SICA Joint Secretary said.

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