Higher cotton production because of good rainfall in India and increased sowing by growers could adversely impact prices. According to the estimates of Cotton Corporation of India (CCI), cotton output is likely to increase 13.6 percent to 35.5 million bales for the October 2019 to September 2020 season. India Ratings and Research (Ind-Ra) on 25 November 2019 said that area under cotton cultivation has increased by 6 percent y-o-y in the current season.
It must be noted that raw cotton exports in India dropped by 75 percent during 1HFY20 due to high domestic prices & the availability of cheap cotton from Vietnam, Brazil and the US, thus, prices will take a hit, the agency said.
Cotton prices saw a moderate reduction in the month of September, with the CCI buying at MSP in Haryana, Punjab, Rajasthan and Gujarat. The CCI has purchased around 1.2 million bales or around 1 percent of the total arrival in the current cotton season. The cotton crop in Maharashtra is expected to be delayed, because unseasonal rainfall has spoiled around 1.9 million bales in the state. The damaged crop may get prices that would be 30 to 35 percent lower than the MSP because of high moisture content.
The spinning industry faced problem during production in 2QFY20 due to low demand and instability in cotton prices. Whereas demand from China improved marginally in the months of August & September, a further improvement will be good for the spinning industry that has been facing margin pressure & low capacity utilisations.
Manmade fibres or MMF saw the 2nd successive month of stabilization on the back of stable crude prices. The short-term instability in prices in the month of September, after the attack on the refinery of Aramco, Saudi Arabia led to temporary pressure on the margins of synthetic fibres. The agency said with the recovery of attacked oil sites, crude rates became stable, with a corresponding impact on Manmade fibres prices.
Fabric exports went up in 1HFY20 due to improvement in the quality of Indian fabrics & addition of new markets. A sharp increase in imports of cheap apparel from neighboring Bangladesh has rendered the Indian textile value chain uncompetitive. Meanwhile, readymade garments recorded a de-growth of 14 percent month-on-month in September 2019 because of a steep fall in demand from the UK and the US, Ind-Ra informed.
