MUMBAI (Commoditiescontrol) – India cotton prices rose over 35 percent since April and has turned premium over Cotlook Index A and difference with China has narrowed significantly, which may threat textile and garment exports competitiveness in the international market. Meanwhile, U.S ICE Futures were mostly flat during the same period.
Government of India has fixed the textile and clothing export target at $48.5 billion for the current fiscal, aiming for an over 21% rise in outbound shipments from the actual level of 2015-16. The country’s overall textile and garment exports remained almost flat at $40 billion in the last fiscal, down from the official target of $45-47.5 billion for 2015-16.
It appears very difficult to achieve textile and clothing export target of $48.5 billion as sharp rally in domestic cotton prices may hurt its competitiveness in the global market.
Domestic Mills Under Stress Worries of cotton spinning mills are still looming as multiple global factors play out to influence the demand for and the price of yarn as well as that of cotton—the critical raw material. Cotton prices during first two quarter (October-March) of current season that begins from October 1, 2016 were mostly flat, but afterward since April recorded sharp run of over 35 percent, while finished product like yarn prices rose just 15 percent.
The country’s mills especially small and medium scale are under immense pressure due to sudden and strong surge in cotton prices, which has upset these industries financially. Tight availability of raw material, along with higher prices of cotton and slow domestic and exports demand for finished products has left these industries in dire situation.
India’s cotton consumption during current marketing year (October 2015-May 2016) has dropped 1.9 percent at 198.90 bales (170kg each) from 202.85 lakh bales same period a year ago.
The consumption is likely to fall even more in the coming months in case the current situation didn’t revise soon due to higher cotton rates and poor off take in finished products.
Mills Caught In Wrong Direction Cotton production during the early harvesting period was pegged somewhere around 375 lakh bales by various trade bodies that has created a chaos that availability of cotton in the country will remain smooth throughout the year, but as the season progress supplies in the domestic market turned thinner-and-thinner and has created short supply thrives mills to purchase cotton for their requirements, but slow selling made their jobs even more difficult.
According to trade experts cotton crop will not be more than 325 lakh bales. They raised their concern India cotton and textile industry is one of the largest in Asian countries and effective crop forecast system should have made in practice helping the entire chain.
In between domestic mills were started looking to source cotton from overseas to fulfill their offseason requirements followed by expectations of delayed harvest due to delayed monsoon onset followed by slow progress.
India Cotton Imports Likely To Double In 2015-16 India's cotton imports may double and increase in reliance on the commodity from Pakistan, West Africa, Brazil. U.S and Australia, industry executives said.
"We expect cotton imports to increase from 1 million tonnes last year to 2 million tonnes this year. The shipments have already started arriving," said Atul Asher, secretary, Indian Cotton Federation.
The difference in domestic and international prices led to rise in imports. Bulk imports from Australia, expected to be 5-6 lakh bales, have resumed after nearly a decade. After the surge of monsoon rains, kharif sowing of cotton is in full swing in most parts.(For Latest Sowing Report: Click Here)
Chinese Cotton Reserve Auction Impact On Indian Market The auction initiated by China from May 3 onwards has also put impact on India’s spun yarn production. The state reserve has received great response for its auction and managed to liquidate around 12 lakh tonnes so far since inception. (Full Report)
Since China was the major consumer of Indian cotton and cotton yarn and shared around 40 percent of total export in 2015. Demand from China for Indian cotton and cotton yarn is likely to significantly drop as local mills are getting cotton at competitive rates and thus yarn produced by them will be provide competition in the global market.
According to the latest report by ICRA, the offtake by Chinese mills under ongoing reserve cotton auctions in China has put India’s cotton and cotton yarn exports in a cautious mode.
Conclusion # There Are Huge Roars In The Market That Cotton Will Rise Rs 50,000/Candy (356kg Each) And Beyond, But One Should Take A Note That Spinning Sector Is Under Great Stress Due To Huge Disparity, Which May Led To Reduction In Cotton Consumption In The Coming Months Resulting Correction In Cotton Prices.
# India Cotton Consumption May Drop Sharply I.E. Around 20-25 Percent In Next Four Month (In Case Yarn Prices Didn’t Improve).
# With The Current Cotton Prices, Majority Of The Mills Are Facing Loss (Rs 15 To Rs 20 Per Kg Of Yarn)
# China’s Central Bank Has Let Currency Fall
# China Has Edge Over India Due To Huge Cotton Availability
# Higher Cotton Prices May Prompt Mills To Shift Towards Synthetic Yarn
(By Commoditiescontrol Bureau; +91-22-40015533)
Rate this story
Rated
0.0
Comment :
Note : This forum is moderated. We reserve the right to not publish and/or edit the comment on the site, if the comment is offensive, contains inappropriate data or violates our editorial policy.
0 Comments 
Post Comment .png)
Government of India has fixed the textile and clothing export target at $48.5 billion for the current fiscal, aiming for an over 21% rise in outbound shipments from the actual level of 2015-16. The country’s overall textile and garment exports remained almost flat at $40 billion in the last fiscal, down from the official target of $45-47.5 billion for 2015-16.
