Cotton is quickly getting addedup to the list of scarce commodities. Cotton is the basic raw material for manyvalue added products in the textile sector. The recent past has seen a drasticincrease in the prices of raw cotton. International cotton scenario witnessedan upturn during the past few months. Due to this unprecedented hike in cottonprices, farmers have suffered huge losses, which resulted in a lower acreage ofcotton. While US continues to move higher in a steady manner, local markets inChina, Pakistan, and India prices exploded and traders are trying to covershort positions.

 

Mr. A. Sakthivel, President, FIEO/TEAproposes the Indian Government to strike a balance between the volume of rawcotton to be exported, and availability of the same to fabric, and garmentexporters. The Government may consider allowing 50 lakh bales for exports in ayear with monthly ceiling of 4 lakh bales so that raw cotton exporters ensureregular export supply to maintain their markets and simultaneously ensuringadequate supply of raw cotton at reasonable price to end user domesticindustry. He speculates a further increase in the prices of cotton as theexporters have purchased nearly 20 lakh bales of cotton.

 

In an exclusive interview with &sec=article&uinfo=<%=server.URLEncode(2251)%>" target="_blank">Fibre2Fashion, Mr.P G Makhija, Executive Director of GAEL (Gujarat Ambuja Exports Limited)said, Cotton exports must be banned and that Government should preventhoarding of raw cotton to overcome crisis in the domestic cotton market.

 

Textile exports of Pakistan saw a remarkable improvement due to the shipments of raw cotton and cotton yarn.

However, these products havebecome a matter of concern for the value-added textile products due to elevatedprices of these items. In the Chinese market, future contracts for May 2010surged by RMB 210 per ton to RMB 15,620 per ton. According to cotton experts of China, cotton crop in the country is expected to reduce by 10 % during thecurrent year, which is approximately 7 million ton less. Despite releasing500,000 tons of cotton from its state reserves, the dragon nation was not ableto suppress the bullish price rally in the cotton markets.

 

Farmers from Bangladesh expect good results for their cotton crop with new varieties introduced in thisseason.Rupali HSC and Lalteer cotton varieties, which are less susceptible topests, have the capacity to produce two times more volume of cotton than theCB-9 and CB-10 varieties. These varieties can produce maximum 7 tons per hectare,or 7 to 8 maunds per bigha, while high-yield Rupali HSC and Lalteer varietiescan produce 18 to 20 maunds. Bangladeshi farmers are optimistic about anincrease in price between Tk 2,200 and Tk 2,400 per maund, this year, which iscomparatively higher than the Tk 1,800 to Tk 2,000 per maund of the previousyears. They are expecting to generate a profit of Tk 15,000 per bigha, duringcurrent season.

 

In Zimbabwe, soaring prices ofcotton lint and high duty imposed on imported raw materials and other inputshave caused many textile companies to collapse. This poses a threat of massivejob losses and a failure in tapping the export market. Mr. T Gutu, Chairmanof Textiles Manufacturers Association of Zimbabwe, while sharing his viewsregarding the same with &sec=article&uinfo=<%=server.URLEncode(2251)%>" target="_blank">Fibre2Fashion,stated, The reason behind rising cost of cotton in Zimbabwe is two-fold. Ourexchange rate is fixed by the state, and we have a hyper-inflationary economy.Increasing price is therefore an inevitable trend. In addition, theinternational price of lint has appreciated with the devaluation of the USdollar, and hence in real terms commodity prices will follow suit.

 

 

Increase in the price of cotton has led to a sharp increase in the prices of cotton-blended yarn. Cotton yarn prices have increased by 10-15% during the recent period. Hike in cotton prices will force many textile mills to close down thereby affecting weaving units as well as end use consumers such as fabrics, made-ups and garments exporters. It will have seriously implications in the livelihood of many resulting in the job losses of thousands of workers.

 

Some meaningful mechanism should be found to make sufficient cotton yarn. At the same time, value added sectors should also be kept in focus with response to the changing market trends.

 

References:

 

  1. &sec=article&uinfo=<%=server.URLEncode(2251)%>" target="_blank">http://economictimes.indiatimes.com
  2. &sec=article&uinfo=<%=server.URLEncode(2251)%>" target="_blank">http://sappk.wordpress.com