Surplus cotton supply may offer Indian spinners respite during the
second half of this fiscal as they have been facing challenges due to falling
exports due to a weak demand in China and a domestic demand slowdown amid
inventory clearance prior to implementation of the goods and services tax
(GST), according to a report by credit rating agency ICRA.
As global cotton production during this cotton
year (CY) is estimated to exceed consumption after two consecutive years of
shortfall, the resultant cotton surplus will create a downward bias in prices,
which augurs well for the domestic cotton spinning industry, a news agency
quoted ICRA senior vice president Jayanta Roy as saying.
The cotton crop output in the country is expected to grow by 5 per cent to 36 million bales
in CY 2018. There has been a 12 per cent rise in sown area in CY 2018, driven
by firm cotton prices, which made it remunerative for the farmers to choose
cotton against competing crops, ICRA said. While the cotton-yarn prices were holding firm
till August 2017 despite demand-side pressures, those have been corrected by 5
per cent in September 2017 due to sustained demand-side pressures and in
anticipation of softening cotton prices, said the rating agency.However,
with further correction in cotton prices expected with the commencement of
harvest season in October 2017 onwards, we expect the spinners profitability to
improve during the second half of the current financial year," Roy added.
Source: NDTV, India Wednesday, 04 October 2017