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Cotton prices up in last three days

Jan '06
The cotton prices have turn up 25 percent in the past three days, indicating tough times for textile firms ahead. If many of domestic mills displayed a bulged bottomline last year, it was because of low raw material (cotton) prices.

The highest rate of Shanker variety of cotton in '04 was Rs 17,000 per candy. The lowest rate was Rs 15,400 per candy.

This year, however, the prices have soared from Rs 16,500 per candy — the lowest this season — to Rs 18,500 per candy, which is already past last year's highest. And all in three days.

“Expect price to go up even further,” a trader told. Coming at a time when most of textile companies usually procure cotton in bulk, the news does not augur well for them.

“The rates have increased manifold,” says Tejas Doshi, a Surendranagar-based cotton trader. According him, from Rs 425 a quintal on Friday, the prices have touched Rs 500 per quintal-mark in markets like Botad, Rajkot and Jasdan.

Another cotton trader from Rajkot told that the prices are unlikely to go down. “At present, a lot of customers from Haryana and Rajasthan are buying cotton seeds. And, as a result the rates of raw cotton have gone up,” says Dewang Shah, a cotton trader in Surendranagar.

Analysts say low cotton prices were an important reason why the big mills such as Arvind Mills posted good results in previous quarters. “If companies have to procure raw cotton costs at higher rates, it is natural that the chances of their bottomline being affected are very high,” another analyst said.

Players like Arvind Mills and Aarvee Denims have already started procuring cotton from the market. Executives at Arvind Mills said that they had procured around 5 lakh bales during last season and have already started procuring this season.

However, the company executives refused to divulge more details about the on-going procurement. “We have started procuring cotton,” Vinod Arora, chairman and MD of Aarvee Denims told.

The Economics Times

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