As cotton prices remain stable, spinners and traders are stockpiling.

Cotton prices have remained stable over the past month, helping to improve demand from spinners, traders and international trading houses as the general consensus is that the market may not fall further from here. “There is unlikely to be a sudden drop in prices. That is one reason factories are buying. Prices on the Intercontinental Exchange also rose by 4 cents in the past two sessions, prompting international exchanges to buy,” said a business source who asked not to be identified. “The cotton market remained flat for the past month. ₹ 54,100 and ₹ 55,500 for 29 mm and 30 mm cotton. Demand from factories has been steady and exporters are buying in small quantities,” said Ramanuj Das Boob, purchasing agent for multinationals in Raichur, Karnataka.

Lack of liquidity

“It seems that cotton prices are over. A difference of 2-3 cents between domestic and world prices attracts international trading centers, says Anand Popat, a cotton, yarn and cotton waste trader from Rajkot. Prabhu Dhamodharan, Convener, Indian Texpreneurs Federation (ITF), however, said that while current prices are reasonable, lack of liquidity in the market has reduced the purchasing power of the cotton business.

Currently, ICE March futures are trading at 82.81 US cents per pound (₹54,425 per 356 kg candy). The natural fiber cash is trading at 80.26 cents (₹52,750 apiece) on the exchange.

Demand for quality

In the domestic market, the export reference variety Shankar-6 was priced at ₹ 55,300 per. At the Rajkot Agriculture Marketing Committee yard in Gujarat, kapas (raw cotton) fetched ₹ 6,885 against a minimum support price of ₹ 6,620. “When merchants realize that this is the minimum price they can expect, they will stock quality material. Due to quality fluctuations, there is always a demand for quality cotton at this level. This is the best time,” said Das Boob. “Cotton Corporation of India (CCI) has so far procured around 20 lakh bales (170 kg). From now on, it could procure 40-50,000 bales per month. Others held 15-20 lakh bales. This could push prices higher, Popat said.

Retail buyers beware

According to a business source, the acquisition of CCI was a surprise and could hinder the movement of the market during the period. Popat agreed that the CCI could be decisive in controlling prices later this season. Das Boob said CCI’s purchases could exceed 30,000,000 bales. “The market share of cotton fabrics is occupied by imports of synthetic dyed fabrics. Slow domestic demand in the retail sector has made buyers cautious. As a result, manufacturers have seen variable demand,” said Dhamodharan.Raichur purchasing agent said now is the best time to get good quality fibre. “We believe that good quality cotton will maintain this price level and in the near future it may increase depending on the demand for yarn if arrivals decrease,” 

The ITF Convener said that while overall cotton utilization has improved compared to the previous two quarters, the textile sector continues to underperform due to lack of visibility of strong orders.

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