Cotton prices plunge to 3-year low, ginning mills suffer

Ahmedabad: Due to declining international prices, cotton rates have hit a three-year low of Rs 53,500 per candy (356 kg). Despite the peak season, Gujarat's ginning mills are experiencing financial difficulties following the price drop, with over 25% of units becoming non-operational. The state witnessed a daily arrival of 30,000 cotton bales (170 kg each), with the Cotton Corporation of India (CCI) making substantial purchases. Meanwhile, spinning units are operating at near-full capacity and showing positive financial results."Cotton prices are at a three-year low below Rs 54,000 per candy. The ginning units are struggling as they bought raw cotton at higher rates. Now the rates are falling continuously, putting the mills under pressure. Ginning units have higher fixed costs; therefore, these units do business for turnover even after losses," states Apurva Shah, vice president, Gujarat Chamber of Commerce and Industry (GCCI).Industry reports indicate a decline in cotton cultivation in Gujarat, with an estimated production of 88 lakh bales this year, a decrease of 4 lakh bales compared to the previous year. "Nov to Jan is considered the peak cotton season, and despite that, ginning units are not operational at full capacity. Gujarat has around 800 ginning units; out of them, 450 are fully operational, while many are operational for a few days a week. About 20% of the mills have not started pressing this year," added Shah.Spinning facilities have become profitable as cotton prices have declined. "As of now, spinning units are witnessing some profitability as cotton prices have gone below the Rs 54,000 per candy level. Now, CCI is procuring a significant quantity, and we demand it should keep a reserve quota of cotton for the Indian textile industry to ensure the industry gets priority. Spinning mills in the state are running at almost full capacity, and yarn prices are currently Rs 240 per kg, but demand is not strong. So there is a fear that prices will reduce in a few days because cotton stock in the open market is reducing with strong buying by CCI," explained Jayesh Patel, senior vice president, Spinners' Association Gujarat (SAG).