Good Supply Vs Poor Demand Resulted In Unexpected Lower Prices


With time, industry activities are improving, but the road to normalcy is still a long one. The industry is looking forward to 3rd May in view of easing up of the lock-down. People are preparing themselves to give a new start to business and life.

Cotton arrival was slow in the  market, all India daily cotton arrival is reported around 20,000-25,000 bales per day, out of which Gujarat accounts for 2000 bales of V797 and nearly 5500 bales of Shankar-6, including CCI numbers. Around 25 CCI centres have resumed in Gujarat.

Farmers are willing to sell the current cotton stock before the start of the new season, but at the same time they are looking for better prices. For the whole of the season, farmers were able to get a good price, also with CCI buying at MSP. However, as CCI activities were in low-key due to the lockdown, farmers were intending to sell cotton at prices lower than MSP, to private ginners.

Cheaper seed cotton and better cotton seed price giving better parity to ginners 
Ginners are able to sell running cotton at around Rs 34500-35000 per candy comfortably. But at these prices also there is not much demand. Despite a hike in ICE, Indian market did not move and in fact prices fell in terms of USC.

Only few of ginning factories are operating, Most of the ginners are waiting till May 3 to restart operations. Majar issue that ginners face in restarting operations is labour unavailability – most workers had left for their native villages and have not returned yet, as state borders remain sealed. Moreover, the norms of social distancing, face masks and sanitizing the premises frequently are not feasible for factories (and is certainly a new way of operating), which can increase the risk of infection.

Also Read  TASMA Urges Mills To Stop Buying Cotton Till Normal Prices Established

Cotton being a non-perishable commodity, growers can hold on to their produce for a longer time.

At present, the demand for pressed cotton has gone down, given that most of the textile mills have downed shutters. Price of cotton candy (356 kg of pressed cotton) has fallen to Rs 34,000 for 29mm Gujarat/S-6.

Indian prices are trading on the lower side, and it would not be surprising if prices went down further, in view of good supply against poor demand, despite of any small upside movement in ICE.

Cotton sowing in North India
Cotton sowing has started in North India but is running behind schedule. The Punjab agriculture department finally has started efforts for sowing cotton, the second biggest kharif (summer sown) crop of the state. Water has been released in almost all water channels and is expected to reach the tail-end villages soon.

The department is mulling the option of making announcements from the public address systems of gurdwaras in villages about the availability of seeds.

The state government has set a target to bring about 5 lakh hectares under cotton this season, from 3.90 lakh hectares in 2019 season. Ideal time for cotton sowing is considered from the first week of April to May 15 as the crop sown after that prone to pest and disease attack.

13% of cotton crops planted in US (by Apr 26, 2020)
By the week ending April 26, about 13% US cotton crops have been planted, up 2% from last week, 3% from a year ago, and up 2% from five-year average, according to USDA.

ICE Cotton Futures
ICE Cotton futures put in a strong performance, including limit-up in the expiring May and near limit-up settlements in the May and July.

There are rumors that China may buy various commodities, including cotton from the US. ICE July cotton reported good buying and came out from its lower trading range and now its active contract July is trading around 56-57 USC.

Also Read  Bangladesh Exports To SAARC Countries On The Rise

ICE May is trading on notice with very small open interest, so now most active contract is July.
If things are not going to improve soon and worldwide sowing intentions are good to satisfactory, in short term ICE can sustain here somewhere or can trade lower as well.  Weaker rupee, higher ICE andstable to weak Indian cotton prices make Indian prices comparatively attractive. However, there is no demand in the market as the textile value chain has to restart operations.

Vardhman starts operations across all units
Leading textile producer, Vardhman Group has resumed its manufacturing operations across all its manufacturing locations in Punjab, Himachal Pradesh and Madhya Pradesh, as the government grants permission to do so with a limited workforce following social distancing norms.

The spinning units of the Group are currently operating at about 40-45% of the production capacity. About a week back, fabric manufacturing activities also started on a small scale. It resumed yarn production in the second week of April while making sure to follow the guidelines prescribed by the state governments and the Ministries of Health.

Extension of scheme to rebate taxes on garment exports
Garment exporters will continue to get rebate on central and state taxes on their outward shipments as the government has decided to extend the RoSCTL scheme beyond March 2020 to enhance competitiveness of the labour-intensive textiles sector.

The Ministry of Textiles has issued a notification extending the Scheme of Rebate of State and Central Taxes and Levies on Export of Garments and Made-ups (RoSCTL) which was in force up to March 31, 2020. The RoSCTL scheme provides rebate on all embedded taxes on exports.

Also Read  Textile Mills Hopeful Of Better Cotton Season

US Weekly Sales (23.04.2020)
Net upland sales of 15,700 RB for 2019- 2020 were down noticeably from the previous weeks and down 73% from the prior 4-week average. For 2020-2021, net upland sales of 46,400 RB were primarily for Mexico (16,000 RB), Indonesia (9,200 RB), Pakistan (8,800 RB), Bangladesh (4,000 RB), and Turkey (3,300 RB). Uplandexports of 2,66,200 RB were down 15% from the previous week and 33% from the prior 4-week average. Exports were primarily to Vietnam (86,800 RB), Pakistan (40,500 RB), Turkey (40,000 RB), China (30,800 RB), and Bangladesh (16,800 RB).

US weekly sales (4/23/ 2020) 
Net sales of 434,800 RB for 2019/2020 were up noticeably from the previous week, but down noticeably from the prior 4-week average. Increases primarily for China (422,400 RB, including 1,300 RB switched from Vietnam and decreases of 18,900 RB), Vietnam (13,900 RB, including 1,800 RB switched from China, 800 RB switched from South Korea, 100 RB switched from Japan, and decreases of 3,000 RB).

For 2020/2021, net sales of 148,500 RB were primarily for China (115,300 RB), Turkey (16,700 RB), and Vietnam (11,900 RB). Exports of 253,700 RB were down 5 percent from the previous week and 31 percent from the prior 4-week average. Exports were primarily to Vietnam (71,800 RB), Turkey (47,700 RB3), Pakistan (35,200 RB), China (28,900 RB), and Bangladesh (26,600 RB).

(Vimal Verma is a Cotton Trader)


Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.