After a recent spell of bullishness, cotton prices have started cooling down in Gujarat as the millers have gone slow on buying in the wake of piling up of cotton inventory. The prices for Shanker-6 variety of cotton had touched a peak of Rs 62,500 per candy (a candy = 356 kg) last week. However, it has now eased to Rs 60,500 to Rs 61,000 per candy.
Cotton traders maintained that the fall in the prices is a temporary phenomenon as arrivals may reduce in coming days, triggering a price rise by April end.
"Cotton prices have dipped by more than 2 per cent in last seven days. But this may not last longer as there are other factors that can keep up the prices in the long run. Also, this is a lean season for millers to buy cotton due to ending of the financial year. They may start fresh buying from next month onwards," said NM Sharma, managing director, Gujarat State Cooperative Cotton Federation Limited (GUJCOT), a farmers’ cooperative.
According to industry insiders, millers have stopped buying due to nonviable yarn exports, which are affected due to rupee appreciation against dollar and a reduction in the international yarn prices.
"Yarn exports are not attractive at present. International prices are low and strong rupee is making the exports costly, therefore mills are avoiding fresh buying. This may last for some time till the inventory gets cleared at the millers," said an Ahmedabad-based cotton yarn exporter.
"Arrivals are stable in the markets at present but there are no buyers, hence prices are going down. This may last for some more time as mills have excess inventory piled up with them. The buying is almost 50 per cent less than the last month, this has caused the prices to come down," said a cotton trader from Surendranagar.
So far in the domestic market, cotton prices have remained lower against the international prices. Industry experts informed that the international prices have remained stable at around 195 cents per pound, while the domestic prices have remained at discount against the international prices.
The weakness in the domestic prices was mainly attributed to the increased supplies following the restricted exports. The cotton production in the country for the current season is estimated at 40 million bales (a bale = 170 kg) in 2011-12.