Surplus cotton supply may offer Indian spinners respite

Surplus cotton supply may offer Indian spinners respite during the second half of this fiscal. Local spinners continue to face challenges due to falling exports on 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 resulting 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.