Cotton prices up 15-30% due to high demand

Cotton prices have risen by 15 to 30 per cent since the beginning of the year across varieties due to limited supplies and high demand, an economist said.

"Cotton prices scaled historically high levels in June, driven by active purchasing by mills and strong demand from yarn producers in Asian countries. The overall shortage in supplies of the raw material, coupled with heavy buying especially from China, saw physical market prices of cotton race forward," NCDEX Knowledge Management Department Economist Kavita Chacko said here.

Prices for Shankar 6 variety cotton ruled around Rs 29,500 per candy (356 kg) in the physical markets in June, 2010. Domestic prices were supported by fresh export demand after the government lifted the ban on exports, Chacko said.

Cotton prices soared to record highs in June, largely on the back of limited supplies and high demand. The upward momentum in prices was supported by the surge in demand for the raw material from China.

Chacko pointed out that the Indian government has partially lifted curbs on cotton exports, allowing registered exporters to ship overseas from July 2, 2010.
    
The government is also likely to fix the volume of cotton exports from the country each year, declaring in advance the quantity available for export and for domestic consumption.
    
Restrictions on the export of raw cotton were imposed by the government in April in an attempt to help the labour- intensive domestic textile industry as cotton prices soared due to the 15-20 per cent shortage in global cotton production.
    
India, having recorded good production in 2009-10, was an important supplier to the world cotton markets, Chacko said.
    
The distribution of monsoon rains fell short of expectations in June and sowing in many parts of the northern zones was affected as a result. However, the recent progress in the monsoons, covering most of the country, has improved the prospects for cotton sowing.
    
As of the end of June, 2010, a 19 per cent increase in cotton acreage was seen on a year-on-year basis. The area under cotton cultivation stood at a little over 26 lakh hectares, according to the Directorate of Cotton Development.
    
Various agencies have been forecasting a sharp increase in Indian cotton production in the current season, with farmers shifting to cotton owing to better crop remuneration.
    
The Cotton Corporation of India expects cotton acreage in Gujarat, one of the chief producer states, to increase by 10 per cent.
    
Various agencies have forecast domestic cotton production in 2010-11 to cross 300 lakh bales.