Spot cotton prices to stay firm: Refco

With the cotton season end approaching, the domestic spot prices are likely to rise or at best maintain its current level, even if the international prices were to fall drastically, says a report by Refco Commodities.

At the beginning of the season, the Indian cotton varieties were proving to be competitive in the international market. Besides, considerable quantity of the good quality cotton stocks was also contracted for exports. This had caused the prices to soar.

But the fast approaching season end and the lesser quantity of the exportable quality have brought the domestic prices down.

The factors that would support the expected rise in prices include the fluctuations in international prices, higher exports of good quality of cotton, higher quarterly consumption resulting in lower stocks and the likelihood of thin closing stocks.

India's cotton textile industry, which was witnessing a recession, seems to have turned around since the last quarter of 2003, the report said.

In October 2003, the depressed yarn prices responded to the high raw material prices. After months of negative growth, the cotton yarn production is witnessing positive growth in production.

Latest figures reveal that in January 2004 India produced a total of 1,99,950 tonne of cotton yarn, an year on year increase of 9.1 per cent. Cotton cloth production too has improved marginally by 1.3 per cent during the same period.

India has seen a bumper crop in the season. Despite the low opening stocks at home, and high prices abroad, cotton prices in India have been near the record highs throughout the season.

The whole textile economy is gearing up for the post 2004 scenario. With major multinational brands are coming into India to open outlets as well as outsource production, the industry is witnessing modernisation.

The report states that consumption is expected to increase post 2004 and that unless the production and the quality keeps pace, prices will remain high along with higher imports.