- 27 Jun 2022
- ICICIdirect Research
Global, Indian cotton prices decline amid subdued demand
News: As per media reports, after a sharp rally in cotton prices, global cotton prices have declined significantly by 35% to $ 1 per pound (~Rs 170/kg) after hitting an 11-year high of $ 1.55 per pound (~Rs 270/kg) on March 2022. Also domestic cotton prices in India have declined from their all time highs of Rs 300 kg to Rs 250 kg but at a slower pace (down ~ 15%).
Views: We believe the impact of decline in global cotton prices would soon reflect on Indian cotton prices, which would get aligned to global cotton prices. Decline in cotton prices is expected to cool off the inflationary pressure on the entire textile value chain. However , the impact is expected to be gradual as stakeholders in the cotton value chain are expecting a further decline in cotton prices which is likely to defer the cotton purchases by cotton yarn manufacturers. We believe that post stabilisation of the cotton prices demand from cotton value chain would improve and yarn manufacturers who were operating at sub optimal utilisation of 35-40% owing to minimal to negative cotton yarn spreads should witness higher utilisations over the medium to long term.