- 08 Sep 2022
- ICICIdirect Research
Arrival of new cotton leads to softening of cotton prices
News: As per media reports, market participants are expecting a further decline in cotton prices in anticipation of higher production of the crop as well as current subdued demand from the textile industry.
View: The early sown cotton has started reaching the market and cotton prices have declined below Rs 215/kg from above Rs 240/kg levels from last fortnight. With the arrival of newer cotton, prices are expected to further correct from October onwards. As per various industry estimates, if crop conditions across cotton-growing states remains normal without any impact from heavy rains in October or further pest attacks, the industry is expecting more than 35 million bales (170 kg per bale) production in the upcoming 2022-23 season vs. 31.5 million bales in the current season. Higher production of cotton would lead to softening of prices of cotton, which is expected to be beneficial for Indian players operating in the textile value chain. With cotton crop in the US being impacted due to unfavourable climatic conditions, Indian cotton textile and clothing exporters should witness improved global competitiveness, leading to a recovery in margins, which have been subdued over the last few months due to domestic cotton prices being higher than global cotton prices.