The Indian cotton market has witnessed a period of volatility, with prices touching a seasonal low due to sluggish demand from spinning mills. However, recent developments suggest a potential stabilization of prices, buoyed by factors such as the Cotton Corporation of India’s (CCI) minimum support price (MSP) procurement and improving cotton quality.
Price Trends and Market Dynamics:
- Bottoming Out: Cotton prices, which had dipped to ₹53,000 per candy (356 kg), have shown signs of recovery, currently hovering around ₹53,000-54,000 per candy. This stabilization is attributed to increased buying activity at lower price levels by spinning mills.
- CCI Intervention: The CCI’s procurement of raw cotton at MSP has provided some support to prices, particularly in regions where farmers are reluctant to sell at lower rates.
- Quality Factor: The superior quality of cotton in regions like Raichur and Adoni has attracted buyers from North India, where production was lower this year.
Challenges and Outlook:
- Weak Yarn Demand: The sluggish demand for yarn has constrained buying activity by spinning mills, particularly in the South.
- Global Market Influence: The decline in ICE cotton futures has prompted multinational companies to adopt a cautious approach, further impacting market sentiment.
- Farmer Sentiment: Farmers in Gujarat are holding back their cotton, hoping for higher prices, which has slowed down ginning activity.
Industry Perspectives:
- Ramanuj Das Boob: A sourcing agent, believes that the current price levels are attractive for millers to make purchases.
- Anand Poppat: CEO of Cotyarn Tradelink, anticipates that prices have reached their bottom and are unlikely to decline further.
- Pradeep Kumar Jain: President of Khandesh Cotton Gin/Press Owners and Traders Association, highlights the challenges faced by farmers, ginners, and mills due to weak demand and market uncertainty.
Production and Consumption Estimates:
The Cotton Association of India (CAI) has projected a 7% decline in cotton production to 302 lakh bales for the 2024-25 season. Consumption is expected to remain flat at 313 lakh bales.
As the cotton market navigates these complex dynamics, the interplay between domestic demand, global trends, and government interventions will be crucial in shaping future price trends and industry outlook.
