Weak cotton prices hit ginning units

Nearly half the units are not yet operational in the current cotton season

Weak cotton prices this season have hit the ginning industry across the country, which is estimated to be losing around Rs 8 crore a day on trading roughly around 80,000 bales  every day (one bale is 170 kg). There are about 4,500 ginning units in the country, of which nearly half are not operational at the moment.

According to industry estimates, the ginners are losing Rs 800-1,000 per bale as cotton prices have fallen by Rs 1,000 per candy of 356 kg to Rs 32,000-32,500 in the past two weeks, while prices of cotton seeds are down Rs 75 to Rs 400-425 per 20 kg. Therefore, on account of weak demand, nearly half of the ginning units have not even started operations across the country. Many would not commence work until next month.

A bale of raw cotton contains nearly 33 per cent cotton lint and 63 per cent cotton seeds, while five per cent goes into waste. At current prices, raw material cost to ginners is around Rs 7,500 per bale. Add another Rs 500 per bale as processing cost. However, as prices are down in the market, the ginners are fetching only Rs 7,000-7,200 per bale against an investment of Rs 8,000 per bale.

Of the 4,500 ginning units in India, half of them are not operational at the moment. Only 700 units are operational out of 1,300 units in the top cotton growing state of Gujarat. During the same period last year, around 1,000 units had commenced work here.

Around 500 ginning units are located in North India while Maharashtra has 1,000-1,100 cotton ginning units.

  All the major cotton growing states — including Gujarat, Punjab, Haryana, Maharashtra, Andhra Pradesh and Rajasthan — are facing a similar situation. Moreover, ginners are facing severe trouble in the northern states of Punjab and Haryana where cotton production is estimated to be down 50 per cent due to damage to the crop this year. While the ginners in these two states are affected, the lower production in Punjab and Haryana has not pushed up cotton prices as such. The northern belt accounts for only 13-14 per cent of cotton production in the country, with states like Gujarat being the major production hubs.

Punjab Cotton Ginners Association president Bhagwan Bansal said, “Ginning industry in North India, especially in Punjab and Haryana, are not doing well as cotton crop in both the states have been damaged badly. At the same time, prices are also not favourable for the business and as a result, most ginners are not willing to open their units this time.”

Currently, daily arrival of cotton has touched 125,000 bales. Arrival in Gujarat is 45,000-50,000 bales per day.

“Higher arrival of the new crop has brought the prices of cotton and cotton seed. Moreover, the demand for cotton from exporters and yarn mills is also below normal. All these factors combined have created disparity for ginners in this season. We are losing Rs 800-1,000 per bale,” said Bharat Wala, president of Saurashtra Ginners Association (SGA).

According to traders, exports are in a slow lane and demand for yarn is also weak. Export demand is likely to pick up around December. Arvind Pan, managing director of Jaydeep Cotton Fibres Private Limited, said, “Export demand is likely to come in December. Arrival of the quality cotton will also pick up after Diwali and prices are also expected to stabilise.”

According to market sources, as on October 31, 2.2 million bales of cotton arrived in the market and till the date one million bales of export registration have been done mainly for Bangladesh, Indonesia, Vietnam and Pakistan.