Indian cotton is now cheaper than anywhere else in the world, trading at a 12-15 percent discount to prices globally, after falling to five-year lows. The India cotton price quotes anywhere between Rs 33,000-36,000 per candy (1 candy is 356 kgs). The US parity price comes to Rs 39,000 per candy.
Demand for cotton has taken a hit locally because of the nationwide lockdown even as exports have come to a standstill due to slowing business activity across the globe. The global consumption for cotton for this year has been revised sharply lower to 22.
5 million tonne by research firm Cotton Outlook, on expectations of weak demand from China, India, Vietnam, US and Indonesia.
But much of that demand will have been evaporated as countries such as India have been in a state of total lockdown for more than a month.
India is also the largest producer of cotton in the world, accounting for nearly 22 percent of global production at 6.29 million tonne.
With global production estimated at 26.0 million tonne, cotton is seen as ending the year with excess supply of 3.
6 million tonne.
Indian authorities have taken steps to revive sagging demand.
The Cotton Corporation of India has revised its bulk discount slabs to the highest ever in history to make it attractive for the textile industry.
The CCI is also be mulling some export incentives. The Cotton Association of India has requested the government for a duty drawback of 5-10 percent to encourage exports once demand recovery sets in in the global market.
But the combination of high crop and low demand means the industry expects cotton prices to fall another 10 percent from current levels over the next 2 months as mills work through their excess inventory through till July.
