Mr. Atul Ganatra, President of the Cotton Association of India replied to a few questions from the Textile Value Chain regarding the cotton crisis:
Current situation of cotton is very fearful, every few months cotton prices are hiked and the industry is disturbed,what is the reason for it?
The reason for the cotton rate going up is everyone in the trade are bullish i.e. from farmers to spinners, due to that farmers are holding the arrivals and bringing cotton for sale very slowly. At the same time all the spinning mills want to buy cotton at a higher rate also as mills are having lower rate inventory and if they buy the cotton at higher rate that may be averaged out. Also, big stockists of cotton bales are bullish, so these stocked bales are also not coming for sale in the market easily.
How we should control this situation? Any practical solutions?
Few reasons for the market going up are fundamental and at the same time it is also speculation. The spinning mills lobby has put 3 demands with the textile ministry to control the cotton rates.
a. Ban of cotton trading on MCX exchange.
b. MNCs and big Indian stockists to be forced to release cotton stocks for spinning mills, otherwise put strict stock limits.
c. Remove 11% import duty on cotton.
If the government will act on spinning mills demand then we can see higher corrections in the cotton market.
What is the CAI role to control price hike?
As per CAI, this year cotton production is 335 lakh bales of 170 kg and cotton import will be around 15 lakh bales. The last year carry forward stock is 75 lakh bales, so total arrivals will be 425 lakh bales. Against this availability cotton consumption is 340 lakh bales and cotton export is estimated at 45 lakh bales so total uses will be 385 lakh bales and closing stock as on September 30, 2022 will be 40 lakh bales. Due to higher rate of cotton, next year we are assuming cotton sowing will go up by 15 to 30% state-wise and overall increase will be 20 to 25%. In many places in India cotton sowing has already started and we are assuming from August onwards new crop arrivals will start. Once new crop arrivals start and new season estimate of production crosses 400 lakh bales, then we may see huge corrections in cotton prices in India.