Indian Texpreneurs Federation (ITF) predicts that current cotton prices will not last
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02 February 2022, Mumbai:
Cotton prices have risen to a 10-year high, and they are increasing on a daily basis in both the international and Indian markets. The combination of plentiful cash and strong demand for commodities has produced positive momentum in 2021.
But now, these basic elements are shifting, and it's time to be more cautious about purchases and inventories because the price will fall sharply and quickly from its current level. A portion of the industry feels that present cotton prices will not be sustained since the fundamentals are weak.
Fashion products demand is declining, according to Prabhu Dhamodharan, Convenor, Indian Texpreneurs Federation (ITF), Coimbatore, due to inflationary tendencies across all markets and a shift in expenditure towards services.
At the same time, retail sales in the United States and the United Kingdom declined in December, while the January Consumer Confidence Survey in the United States plummeted by over 6% to its lowest level since November 2011.
The recent bull run over the last 45 days has been mostly speculative, and ITF believes that present prices are not sustainable. ITF has issued a warning to its member manufacturing enterprises, advising them to proceed with caution.
"We're hearing from overseas markets about consumers' reluctance to accept new rates, and the same signals are showing up in new order confirmations from developed countries," Prabhu said, adding that cotton isn't a vital commodity like edible oils or grains. Its demand is solely determined by people's purchasing ability.
With inflation on the increase, people's purchasing power will be put to the test, and cotton will face a lot of demand destruction in the future.
It's also worth noting that alternative fibers are fast gaining traction as a result of the growing expense of cotton. This shift is being seen by ITF in a number of weaving clusters in Tamil Nadu.
The demand equation will also be rebalanced as a result of this. Due to high pricing, the business is seeing opposition from value chain partners all the way up to the retail side in domestic markets, according to Prabhu. Consumption is being impacted by the inflationary trend, and retailers are turning to alternative fiber items.
Cotton speculative interest will be reduced by signals from wealthy nations limiting liquidity and boosting interest rates, even at these historically high prices.
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