Indian cotton prices have continued to rise rapidly recently due to strong domestic demand, declining cotton inventories and a 10% tariff on imported cotton. In July, cotton prices in India rose by 3,800 rupees within 15 days. The rapid surge in cotton prices put heavy pressure on the industry, causing Indian exports to lose competitiveness.
Since January 2021, cotton prices in India have risen rapidly. The Cotton Company of India has raised the lowest cotton auction price from 51,000 rupees/kander to 54,800 rupees/kander starting from July. , the price of S-6 in Gujarat increased from 43,300 rupees/khand in January to 57,000 rupees/khand in July, an increase of 30%.
Due to strong domestic demand, the cotton inventory of the Cotton Company of India quickly dropped to about 900,000 bales, causing domestic cotton prices to continue to rise. At the beginning of this year in October 2020, the Cotton Company of India had nearly 11.5 million bales of cotton in stock, and then purchased an additional 9.2 million bales.
In addition, the extreme drought in Texas last year led to a decline in cotton production, which also prompted Indian cotton prices to strengthen since December last year. However, the rise in cotton prices has not increased the cotton planting area in India. Instead, many cotton farmers continue to switch to soybeans. As of the third week of July, India’s cotton planting area was 10.893 million hectares, compared with 11.893 million hectares in the same period last year.
The South India Textile Mills Association stated that the sharp increase in cotton prices has brought a serious blow to the cotton textile industry chain and will also lead to an increase in domestic textile and apparel prices. The imbalance in floral yarn prices will force the textile industry to Spinners increase yarn prices to avoid losses. To this end, the association has called on the government to immediately remove cotton import tariffs. The Cotton Association of India also requested the government to cancel cotton import tariffs because there is a domestic shortage of Indian long-staple cotton and machine-picked upland cotton. If tariffs are not abolished, the domestic area will continue to rise, which will have a greater impact on the entire textile industry chain.
Though the CCI has provided a three-month lock-in period for bulk buying, most spinning mills are unable to benefit from it due to liquidity crunch and price uncertainty, while multinational cotton Traders made full use of hedging tools and purchased large quantities of CCI cotton at lower prices. Earlier, the industry had the option of importing cotton during the off-season (July to September) and keeping yarn prices stable. Due to the 10% import tariff, this option is no longer feasible. </p
