Cotton prices are rising! Another hurdle for the sector to overcome

9th October 2021, Mumbai:

Indian cotton prices are much above the government-set minimum support price (MSP) levels in the crop year 2021-22, posing new challenges for the Indian textile and apparel sector.

According to media sources, the price is likely to remain high due to a significant comeback in post-COVID-19 demand and optimistic emotions due to restricted supply. There have also been a few additional indicators that point to a potential price increase in cotton.

Cotton prices have touched an all-time high of Rs. 7,715 per quintal as the second picking of the raw cotton crop gets underway in Punjab.

This price is approximately 23% more than the MSP. Punjab is one of India's most important cotton-producing states. Cotton prices have also increased to their highest level in a decade, according to The Wall Street Journal.

According to trade and industry veterans speaking at a recent webinar, the Cotton Association of India (CAI) believes that, in addition to reducing India's cotton exports, high cotton prices will reduce the Central Government's cotton procurement budget to a minuscule amount, compared to the Rs. 55,000 crore spent on cotton procurement during the previous two cotton seasons.

"The Cotton Corporation of India (CCI) invested a total of Rs. 55,000 crore and purchased 2 core and 7 lakh bales during the 2019-20 and 2020-21 seasons."

Because cotton prices are now hovering at 30% to 40% over the MSP, we may not need to intervene in 2021-22," said Pradeep Agarwal, Chairman, CCI, a public sector enterprise under the Ministry of Textiles.

Despite a drop in cotton planted area from 133 lakh hectares in the previous year to 125 lakh hectares in the present year, cotton output in 2021-22 is anticipated to be between 355 and 360 lakh bales, virtually identical to last year's production of 355 lakh bales.

Cotton is in high demand from spinning mills in the United States, thanks to high profits and strong export demand. Despite the high price of cotton, mills are anticipated to acquire aggressively since demand and consumption are projected to outstrip supply. According to the latest forecast from the United States Department of Agriculture (USDA),

China's cotton consumption in the current marketing year is anticipated to be 41 million bales, or 8.9 million metric tonnes. This is up 24% in the last two marketing years, thanks in part to a post-pandemic spike in consumer goods demand.

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