Expect cotton prices to remain stable going forward: Gautam Chakraborthy, Gokaldas Exports

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In an interview with ET Now , Gautam Chakraborthy , MD, Gokaldas Exports , talks about how the business is shaping up for them. Excerpts:

 ET Now: Since April, the cotton prices are down almost 37%. In the current quarter, does it have an impact on the margins companies such as yours?

 Gautam Chakraborthy: Not really, because in cases of most garment manufacturers, all the bookings of the fabrics are done well in advance, around the time when we get the orders for apparels from our buyers. So the impact if any will be felt only towards, say, the production of August and September, not before that.

 ET Now: You say if any, why is that so?

 Gautam Chakraborthy: Because cotton prices, yarn prices, fabric prices are three different entities. While they may move broadly on similar trends, but there is always a phase lag arising out of how much stocks each level of the supplier is carrying. So that’s why an immediate correlation will be difficult to plot.

 ET Now: What are the kind of inventory levels that you have right now?

 Gautam Chakraborthy: No, we do not have. Most garment manufacturers will not have any inventory levels for the simple reason that all production is against specific orders. So you buy the fabric, make the stuff and ship it out as quickly as possible. Yes, what the impact could be that the retailer, the garment retailer is having stocks, then his order book kind of slows down and that puts an impact in terms of the downstream demand.

 ET Now: Give us a sense of how do you believe cotton prices would shape up, the trajectory over the next two quarters because the feeling is that July is not going to be the best of months as far as monsoon goes?

 Gautam Chakraborthy: Predicting cotton prices is very hazardous if I may say so and I would only at the risk of eating my words try to say something here. Essentially we understand that the spinners are carrying yarn stocks, which have been building up over the last couple of months for the reason that the demand itself is low, sluggish because the prices of the fabrics went up. If the monsoon is good, I expect that things will be better in the sense that the prices will come down further supported by the yarn stocks. However, if the monsoons are indifferent, then we have a situation where the pulls and pushes as to in terms of the demand as well as the stock position, how it will carry. So probably it will remain at the current levels.

Source: http://articles.economictimes.indiatimes.com/2011-07-07/news/29747883_1_cotton-prices-yarn-prices-fabric-prices

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