With favourable weather and market conditions for the production of cotton, India is likely to witness a rise in the planting of this fibre by 15 percent in the 2017/18 marketing season to a three-year high as farmers switch away from other crops, likely boosting cotton production and exports.
Domestic cotton prices have dropped by nearly R500 per quintal to trade to around R5,400-5,500 a quintal from R6,000 around 10 days ago owing to heavy speculation in the futures trade and MCX in this period despite the global rates remaining steady, according to top officials of the Cotton Corporation of India (CCI).
Farmers who were holding onto Kapas in anticipation of better prices will now start to bring in the commodity into the market on the fear of prices coming down, said M M Chokalingam, CMD-in-charge, CCI.
Textile mills in the Manchester of South India are taking desperate measures like reducing production and raising prices of hosiery yarn as the cotton prices that starting soaring in October are unlikely to come down until the next season according to India Ratings and Research. As a result, textile mills in the state, which account for 46% of the spinning capacity in the country, preferred to bring down production by 15% to 20%, to at least cut their losses.
The profitability of spinning companies in the second quarter of 2016-17 likely to get hit, with domestic cotton prices surpassing international cotton prices, adversely impacting the yarn demand and export prospects for the spinning industry, ratings agency ICRA said.
Domestic prices of ginned cotton have increased significantly—from about Rs 90-92 per kg in April to around Rs 122 per kg now. Slow growth in domestic consumption and stagnation in exports are likely to adversely impact demand and export competitiveness of the Indian yarn, the agency said.
Domestic cotton prices to remain under pressure in 2016-17, according to India Ratings and Research (Ind-Ra) report, due to continuation of Chinese direct subsidy-based policy and lower demand from spinning mills.
India Ratings and Research Senior Analyst Neermoy Shah said that it maintains a negative outlook on the cotton sector for the next fiscal. Though Bangladesh, Pakistan and Vietnam have replaced China with India as a supplier, volumes are picking up at a slow pace, and are unlikely to match Chinese demand
Indo Rama Synthetics (India) Ltd, polyester manufacturer due to fall in polyester prices and a drop in international demand has recorded a 77 percent drop in its net profit to ₹4.91 crore in the first quarter of 2015-16 compared to ₹22.05 crore earned in the same period of the previous year.
Sluggish export demand and anticipated higher domestic production have resulted in rates falling below MSP in few states of India. Minister of State for Agriculture Mohanbhai Kundaria said in a written reply to the Lok Sabha that prices of cotton are below MSP in the states of Andhra Pradesh, Telangana and Maharashtra in the current cotton season 2014-15.
The Cotton Corporation of India (CCI) will procure cotton from farmers in 11 producing states as the rates have fallen below the minimum support price (MSP) in Andhra Pradesh, Telangana and Maharashtra, Parliament was informed today.
