Significant Cotton Sales Spike Post Reduction by Cotton Corporation of India

The recent price reduction decision by the Cotton Corporation of India (CCI), a special concession for mass purchasers, in conjunction with the fear of a harvest postponement for the upcoming season due to prolonged rainfall, has fuelled significant cotton sales in the last 48 hours. The introduction of the discount scheme at the start of September has resulted in a spike in sales, with over 350,000 bales sold in the initial two days, a notable increase from the sales of 124,000 bales in all of August.

The bulk of these cotton bales are being procured by traders for the purpose of inventory buildup, with mills showing reserved purchasing activity due to the repercussions of the ongoing trade tensions. The slow uptake of yarn coupled with declining prices are notable influences. The CCI has taken action by implementing a reduction of ?2,000 in the baseline price since August 19, in addition to introducing a discount of ?600 per candy from this Monday.

The total cut in price equals about ?2,600 per candy, equating to roughly 5% of the total cost. The argument surrounding this price reduction states that the CCI’s rates are considerably higher compared to the international market, which has consequently led to an increase in imports. Currently, global cotton prices fluctuate between ?50,000 and ?53,500 per candy for delivery at any Indian port.

Thanks to the elimination of the import duty, mills now have the option of sourcing inexpensive cotton for consumption purposes from December through March. As per the statistics available on September 2, approximately 2.5 million unsold bales are held by the CCI. From this inventory, an estimated 500,000 to 700,000 bales can be offloaded for sale.

After this predicted sales volume, the CCI will necessitate a further cut in prices to stimulate more significant sales activity. The discount scheme implemented by the CCI is operational until September 15. In the wake of abolishing the import duty, there is a noticeable increase in enquiries from mills exploring affordable sources of cotton.

Also contributing to this lively sales activity at the CCI is the concern among some industry stakeholders of a potential delay in the arrival of the new harvest, given the adverse weather conditions currently prevalent. Persistent and excessive showers throughout August appear to have jeopardized the outlook for various monsoon-season crops, cotton included.

Under current price conditions, mills are procuring cotton for immediate use. Furthermore, if mass orders are placed, they receive the benefit of a 60-day credit for upliftment – an additional advantage that is particularly appealing. The cherry on the cake is that if they manage to uplift within one month, they can avail of a discount of ?250 per candy.