On the back of lower international and domestic demand, cotton prices have witnessed a fall of about Rs 3000 per candy during the month of February. Market sources hinted at a further slide in cotton prices during March due to weak overall demand.
"Recent fall in cotton prices is led by lower buying by domestic mills that are facing power cuts. Moreover, export demand has also gone down in February,"said Ahmedabad-based cotton broker Arun Dalal.
The Sankar 6 variety of cotton traded in the range of Rs 34,200-34,400 per candy of 356 kg on February 29. However, the prices were quoted at Rs 37500-37800 during the second week of the month. The prices have fallen by Rs 3400 a candy during February.
"Cotton demand from China has decreased during the month of February and domestic mills' consumption has also slowed due to power shortage in Karnataka," Arvind Raichura, director, Balkrishna Ginning said.
Adding further he said, "Based on last year’s experience, mills are not doing stock this year. They procure from the market as per their requirements." As the prices fell, arrivals have also declined by more than 40 per cent.
In the beginning of the month, cotton arrivals stood at around 65,000-70,000 bales (of 170 kg each) per day at Gujarat markets. But the arrivals fell to 45,000-47,000 bales a day in the last week of February. In India the daily supply is currently in the range of around 100,000 - 135,000 bales against 200,000 - 220,000 bales.
Dilip Patel, president of Gujarat Ginners Association said, "Price has declined as consumption of cotton is less then production. However, the prices are already at the bottom level and it is less likely to fall much from this level."
The current unsold stock is also posing a challenge for the cotton traders in Gujarat. According to Raichura, there is about 1.5 million bales of unsold stock with ginners in Gujarat. An analysis by Tamil Nadu Agricultural University's (TNAU) Domestic Export and Marketing Intelligence Cell (DEMIC) suggested a fall in the prices from current levels. There are thin chances of a rise in cotton prices, rather they are more likely to decline, if China - a key buyer of Indian cotton, discontinues its buying. The supply in the domestic market witnessed a decline of four percent to 22.34 million bales as on February 26, against 23.38 million bales that arrived for sale during the same period last year, data compiled by the Cotton Corporation of India (CCI) showed.