- Krishha Textiles
- 13th July 2024
We at Krishha Textiles would like to apprise you about the developments taking place at domestic and international yarn markets.
As you all are aware the Indian Government has increased the MSP of cotton recently, if we work out precisely, there is an increase of 17% in MSP in the last announced two revisions. At the same time, there has been a bumper crop in the USA and the sowing area has also increased resulting in a subdued ICE. It is expected to remain range bound 68 to 71 USC/lbs.
On the contrary, as per current estimates, the sowing area in the Northern part of India has shrunk by 40% and in Gujarat by 10%. Today’s Indian cotton will hover around INR 58000 per candy and the landed cost of Australian cotton is expected to touch INR 56000 per candy in the next few months. So Indian cotton will trade higher than international cotton by INR 2000 per candy. It is expected that this gap will again be range-bound in the next 6 months.
China has been by and large silent for almost one year and is expected to be silent also in the near future as Chinese mills are selling less than landed Indian yarn prices. The cotton price in China is hovering around 14500 to 16000 RMB/ton whereas yarn prices are hovering between 22000 – 23000 RMB/ton.
The season-average upland farm price has dropped by 4 cents from the May forecast to 70 cents per pound, following a decline in new-crop cotton futures. Globally, the 2024-25 cotton balance sheet shows increases in beginning stocks, production, and consumption, while world trade remains unchanged.
Bangladesh Government has reduced incentives by 2.5% if a garment exporter purchases from local spinning mills. That’s why there was a small window in the last 10 days that could sell 30 CCH BCI at USD 3.15 to 3.20 per kg. and mills in India increased prices by INR 5 per kg. Bangladesh spinning mills have started piling up stocks resulting in a decrease in yarn prices drastically so Indian mills have again become uncompetitive. The gap has again widened by 5-10 cents.
Only a few transactions have happened in the last 5 days in Organic, BCI and other sustainable yarns. Bangladesh, the most active market at present, is having forex issues resulting in late payments and grappling with fewer overseas orders for themselves, which is also a big challenge for the Indian spinning industry.
We cannot sustain on fragmented markets like Europe, Latin America and the Middle East, which have less and inconsistent demand. As per our study cotton yarn market is going to be under tremendous pressure for the next 6 months and profit margins are going to squeeze further.
Because of the war situation between Hamas and Israel and the never-ending Ukraine war, Europe due to high inflation, increased interest rates and economic uncertainty, the purchasing power of the consumers has gone down drastically. On the contrary, the US economy is on relatively solid footing while inflation has cooled, progress has been choppy and inconsistent. So, the overall demand for garments is going to remain sluggish.
The spinning Industry can only survive if good quality of cotton is available at a lower price than MSP which is seemingly difficult as CCI will surely intervene to safeguard the interest of farmers.
So in brief the motto should be “keep selling and keep incurring losses or cut down the production” as the domestic market is also not supporting at the moment.
This is the study from Krishha Textiles which we have compiled after interacting extensively with many ginners, spinners and yarn & garment buyers all across the globe and top retail brands worldwide.
Disclaimer: The views related to cotton and yarn markets expressed above are based on the data collected from various sources like websites and published articles and are variable with the timeline.
Krishha Textiles is a distinguished name in the realm of home decor and furnishings, where quality meets craftsmanship and innovation blends seamlessly with tradition. For over two decades, we have been at the forefront of the industry, weaving dreams into reality with our exquisite range of products.
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DSS 112, MDC, Sector 5
Panchkula, Haryana - 134109 (India)