Cotton yarn prices may increase further going forward on cotton
Cotton yarn prices in India are slated to increase further as the cotton marketing season comes to close, with arrivals falling to abysmal level. This is the usual trend in all seasons as arrival begins in October, peaks in January February and later tapers off as farmers sell out their produce to use the money for sowing the next crop which begin in April. Cotton picking thus starts in end-September to be sold in the new marketing season that begins from October. In US, the same begins in August.
This year, the 2017-18 season, saw cotton yarn prices remain under the influence cotton markets which was further influenced by US Futures as export became lucrative, but also soared the pushed domestic prices. Benchmark Shankar-6 is already costlier by 11% year on year in June this year. Bengal Deshi, the coarser variety was dearer by more than 25% in similar comparison. The size of the crop is sill not finalized, which makes trading even more complicated and spot market tend to take cues from global markets.
The Indian cotton markets will continue to trend global markets. The key reasons that may strongly push prices further up are;
- Increase in prices of long staple fiber. Brahma, Bunny, MCU-5, Surabhi, and DCH-32 prices are 6-7% higher than last year and 16% higher than their levels at the beginning of 2017-18 marketing season
- Reported shortage of comber noil and waste. This has been lifting price of coarser variety cotton which has seen Bengal Deshi gaining 20% from the start of the season.
- Better export realization for cotton yarn is also pushing domestic prices up. In May, the unit price realisation (FOB price) of cotton yarn averaged US$3.21 a kg or INR213 a kg. They were significantly up from the last 12 -month low of US$2.98 a kg or INR191 a kg hit in November 2017.
- Spinning mills are sold out for 2 months. So, stock levels are low to meet any incremental demand which may push asking price
- Coarser count yarns are in major shortage while fine counts too will have dramatic impact of any price increase.
- Some reports cited increase in transportation cost impacting final cost of yarn to consumer.
Cotton yarn prices are expected to increase by at least INR10 a kg across all counts. This will adversely impact fabric makers who are completely disturbed with a major drop in sale currently.
