Cotton Prices Firm in FY19

Mumbai: India Ratings and Research (Ind-Ra) said that the cotton prices are likely to stay firm during the next financial year following the tight demand-supply scenario. The Lower fibre production in the current season (October-September) owing to crop infestation and acreage drop in the coming season (2018-2019) as well as adverse weather conditions in other key cotton growing nations could pose supply constraints. Mumbai: India Ratings and Research (Ind-Ra) said that the cotton prices are likely to stay firm during the next financial year following the tight demand-supply scenario. The Lower fibre production in the current season (October-September) owing to crop infestation and acreage drop in the coming season (2018-2019) as well as adverse weather conditions in other key cotton growing nations could pose supply constraints.

However, the expectation of firming prices might encourage farmers to sow and arrest the acreage contraction. On the other hand, a robust domestic demand and rise in exports on account of the anticipated stock rebuilding by China are likely to keep the global consumption strong. The Minimum support prices (MSPs) for cotton are likely to be higher for the 2018-2019 season than for the previous season. However, given the tight demand-supply scenario, cotton prices might trade higher than MSP, limiting the government intervention. Meanwhile, synthetic textile players are likely to witness a material margin contraction during FY19, due to their inability to pass on the price rise of crude oil-based raw materials, owing to the prevailing overcapacity domestically.
This might become worse because of rupee depreciation as raw material is procured at the import parity price. Moreover, textile dyes and chemical prices are likely to remain high, exerting margin pressure.