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Cotton prices fall 37% on high acreage, inventories

21 Jun 2011 Evaluate

The consistent and sharp decline in cotton prices since April has put the supply chain under tremendous pressure. Cotton prices, in the range of Rs 61,000 per candy (356 kg), fell to Rs 38,000 per candy. With a 15-20 per cent increase in cotton acreage across India and a held over stock of about six million tonnes with traders, ginners, exporters and the cotton industry are having sleepless nights.

A miniscule quota of 1 million tonnes for exports with stringent penalty norms failed to lift the spirits of the industry. A huge inventory that is likely to swell with the arrival of new crop in September-October is also cause of worry for the industry. Most spinning mills are operating at less than 50 per cent capacity. Present situation may have serious repercussions, as farmers have sown larger areas in anticipation of higher prices but the unprecedented price reversal may put them in debt. Until the inventory is cleared, the price improvement cannot be expected.

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