Indian cotton farmers are delaying sale of their harvest, hoping higher price in coming months as there is higher production of cotton.
Meanwhile, the limited supplies are keeping local prices significantly above the global benchmark, making overseas sales unviable from the world’s biggest producer of the fibre.
Regarding this, Atul Ganatra, President of the Cotton Association of India (CAI) said, “Harvesting of the new crop started last month, but many farmers are not willing to sell. They are holding crop hoping prices would rise like the last season.”
As the farmers received record prices for their last season’s crop, so they are not willing to give the same price for the new crop.
But the reality is, the new crop is unlikely to get the same prices as local production has risen and global prices have fallen, Ganatra said.
Babulal Patel, a farmer from western state of Gujarat, the country’s biggest cotton producer said, “Last year we sold raw cotton at 8,000 rupees (per 100 kg) and later prices jumped to 13,000 rupees, this year we are not going to repeat the mistake. We are not going to sell below 10,000 rupees.”
In June, Cotton prices hit a record high of rupees 52,410 rupees per 170 kg. Tracking a rally in global prices and as production fell. But prices have corrected nearly 40% from the peak.
On the other hand, farmers used proceeds from the last few seasons’ harvests to create storage facilities, using to store the crop.
Despite higher output, spot markets were receiving nearly a third lower in supplies than normal, industry officials estimated.
However, Bangladesh, Vietnam and China are among the key buyers of Indian cotton.
It has to be mentioned that, India could produce 34.4 million bales of cotton in the 2022/23 season with 12% up from a year ago.
Also, in the new season India traders have contracted 70,000 bales for the exports, significantly lower than 500,000 bales contracted during the same period a year ago.
Exports are unlikely to gain momentum unless local prices fall or global prices move higher, said the dealer,
Besides that, Indian cotton is holding premium of around 18 cents per lb over New York futures. The premium needs to come down to 5-10 cents to make exports viable, he added.
