"Sankar-6 prices in Gujarat have shot up by Rs 2,500 a candy since June 16. Prices have gone up due to short supply and stable mill demand for cotton," said Arun Dalal, an Ahmedabad-based cotton trader. Sankar-6 prices in Gujarat had touched Rs 25,000 a candy on June 16, which was a record high then. On May 12, it was Rs 22,900 a candy. Since then the prices have gone up by Rs 4,600 a candy. Traders still see scope for Sankar-6 prices further firming up on artificial short supply. "Sankar-6 prices are likely to touch a fresh high of Rs 28,000 a candy in a week's time in Gujarat. Many traders are not selling as they expect that prices will further go up as there are no fresh arrivals in the state," said Jatin Bhindora, a Rajkot-based cotton trader. Sankar-6 in Maharashtra is already Rs 28,000 a candy. But, it will take a few days more to reach that level in Gujarat, he said. Gujarat is the top cotton producing state in the country with a contribution of 11.5 million bales (1 bale = 170 kg) to the country's total cotton output of 31.5 million bales in 2007-08 (Oct-Sep). Traders attribute the price hike to artificial short supply, global firmness in cotton, stable demand from spinning mills, and rise in yarn prices recently. "Around 500,000 bales are still there in stock in Gujarat. Traders are holding their stocks knowing that the millers' demand is stable and fresh arrivals will start only in October," Navin Soni, an Ahmedabad-based cotton trader, said. "Cotton futures in the US have been firm on speculative trading for the last few days. Gujarat, being a top destination for cotton exports, tracks global prices," said Sourin Parekh, president, All Gujarat Ginners' Association. As per International Cotton Advisory Committee, world cotton production is projected to decline marginally in 2008-09 (Oct-Sep) to 25.9 million tonnes from 26.21 million tonnes in 2007-08. On the other hand, global cotton consumption is seen at 26.7 million tonnes in 2008-09 against 26.71 million tonnes in 2007-08. The recent firmness in yarn prices has also helped traders seek higher prices for raw cotton from millers. "Yarn prices have gone up by 25-30 per cent in the last few months. Cotton traders have hiked prices knowing that it is fetching more returns to yarn manufacturers and exporters," Soni said. Ginned cotton is the major raw material for manufacturing cotton yarn. Correction seen
Traders also see Sankar-6 prices weakening if the monsoons are good in July. "If there is good rain in July, we might see a correction ranging between Rs 500-1000 a candy as that will promise timely arrivals of new cotton," said Dalal. "Sankar-6 prices are unlikely to go up further than Rs 28,000 a candy in Gujarat. Monday's price of Rs 27,500 is also a very high level. We expect prices will fall by Rs 700-1000 during July," said Parekh.
Traders also see Sankar-6 prices weakening if the monsoons are good in July.