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2015-3-27
With cotton prices starting to pick up, spinning mills are averse to buying this year. On Tuesday, the price of cotton rose Rs 1,200-1,400 a candy (356 kg) to Rs 33,830 a candy. J 34 is a variety of cotton grown in northern India with a strength of 4.5 micronaire (a measurement of the thickness of the cell walls of a cotton fibre) and length of 29 mm. A surge of Rs 300 per candy in the price of Shankar-6 (long staple cotton of 32 mm and 3.8 micronaire) has also been witnessed in Gujarat and its price is in the range of Rs 32,500 a candy.
These prices are still lower than last year’s price of Rs 44,000 a candy. However, millers are worried a price revision in cotton now will disturb the price parity between yarn and cotton. The low demand for cotton yarn in international markets is already keeping the capacity utilisation low at 80 per cent.
The Cotton Corporation of India (CCI), the nodal agency of the Government of India that purchases cotton if prices fall below the minimum support price, has so far purchased 8.6 million bales (one bale is 170 kg) of cotton, said B K Mishra, chairman, CCI.
“We might purchase another 500,000-700,000 bales in the 2014-15 rabi marketing season. Of this, 260,000 bales have been liquidated by the CCI at a price of Rs 32,500 a candy,” he said. He added that Confederation of Indian Industries (CII) was not planning to liquidate, but would do so if there was a need for it. “The spinning mills can thrive on the market availability till harvesting is on in different parts of India and we project to enter when the harvesting comes to an end.”
Most of the mills said they had stock for three-to-four weeks, but purchasing cotton at a premium amid low profitability was pinching them. They want CCI to intervene so that cotton prices do not rise any further.
According to T Kannan, chairman, CII National Committee on Textiles, if international demand is bullish, 25-30 per cent of yarn manufactured in India could be exported. At present, demand from China is cold.
As CCI has procured one-fourth of the total crop this year, its intervention will boost the health of the mills.
According to Mishra, CCI has 45,000 bales of cotton from last year’s stock and that is meant for government-owned mills.
The millers are also concerned about the fact that cotton loses its moisture content in summer, which means four to five per cent weight loss. This loss is recovered in monsoon, thanks to high atmospheric humidity. So CCI might not offload the stock before the onset of monsoon.
While large mills have a fire-fighting system in place, small mills might have to face lean production days in the wake of flip-flops in CCI’s decision.
Source:Business Standard
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