Textile World News: Cotton Price to Remain Stable

According to the data released by the Office of the Textile Commissioner of India, this cotton season (October-September 2012), cotton production would be at 345 lakh bales of which 95 lakh bales have already been exported and a further 20 lakh bales are expected to be exported.

This would amount to an availability of 230 lakh bales of cotton for domestic consumption for this season and a drop of over 11% in the cotton available for consumption in comparison with the last cotton season. Despite this, cotton prices are unlikely to go up in the short term as most textile companies are cautious in buying raw materials.

According to the latest data available with the Confederation of Indian Textile Industry, cotton prices (average spot prices of Shankar-6 variety) are trading at a discount of around 17% at Rs 34,677 per candy on a year-on-year basis.

The fall in cotton prices was due to the conscious decision many textile companies in the industry's value chain to avoid new orders. These companies, which purchased large quantities for future use, had been unable to get rid of the inventory due to weak demand for apparel in 2010-2011.

According to an analysis of the Confederation of Indian Textile Industry, in the December 2011 quarter itself, textile and clothing production showed no growth. Textiles and apparel production fell by 3.2% and 6.8%, respectively in October, the seventh consecutive month of decline.

There is still a pile of unsold inventory with most companies. One indication of this is the extended end-of-season-sale of apparels, which has gone well beyond January this year. Hence, there is little chance of heavy buying this cotton season unlike in the past. Also, there is a high possibility that apparel demand in the US and European markets will be subdued due to the end of the festive season.

Source: economictimes.indiatimes.com