Why is India's cotton price high and difficult? Deviating from the international cotton price trend?

Cotton is an item often used in our daily life, and it is widely used in various industries, such as medical treatment, clothing, household goods (quilts, etc.), especially in winter, the demand is relatively wide, and the price is almost acceptable to us.

In addition to the self-sufficiency of cotton, we also have some import and export trade, and the price will fluctuate. Judging from the quotations of some foreign investors and large import enterprises, ICE's main contracts have continued to oscillate in 66-69 cents/pound boxes since late June (a low of 66.15 cents, a new low since September 2016). Spot quotations such as US cotton (including new flowers in 2016/17 and 2017/18), Australian cotton, West African cotton new flowers and Uzbekistan have fallen steadily, however, the Indian cotton S-6 did not dive with the deep adjustment of ICE and outer plate, and the ginning mills and exporters were very calm. According to statistics from India's Ministry of Agriculture, as of June 29, the sown area of cotton had reached 71.865 million mu, an increase of 56.5 per cent over the same period last year, which was much higher than expected;

as of June 30, the total amount of new Indian cotton on the market in Japan reached 5.554 million tons, up from 5.454 million tons in the same period last year. However, the ex-factory price of Indian cotton ginning factory and the quotation of Far East main port remained high and stable, which deviated from the trend of international cotton price.

From July 13 to 16, the July/August shipping dates of Qingdao, Zhangjiagang, Shanghai and other major ports are C/A SM 1-1/8 ", EMOT SM 1-1/8" and SM 1-5/32 "Australian cotton and SM West Africa cotton, which are quoted at 81.65-81.75 cents/pound, 78.60-78.70 cents/pound, 84.10-84.20 cents/pound and 79.10-79.25 cents/pound respectively. However, the price quoted by S-6 1-1/8 "China's main port is as high as 84.20-84.25 cents/pound, even slightly higher than that of Australian cotton. The upside-down price with EMOT SM is 5.50-5.65 cents/pound, higher than that of West African cotton by more than 5 cents/pound. From the survey point of view, since mid-June, the port of high-quality Australian cotton, American cotton, black cotton goods, inquiry and contract shipments than the previous active, bonded, spot contract growth, but S-6, J34, MCU5 and other Indian cotton but slow shipment, little response, so what is the reason for the Indian cotton prices in high, sellers rather lack of abuse? The author analyzes as follows:

first, there is almost no profit margin and price reduction space for Indian cotton from the ginning mill to the exporter.. Affected by the increase in MSP in 2016/17, the new monetary policy, GST, etc., the purchase price of Indian seed cotton has been rising all the way and the cost of lint has been rising. However, the strengthening of the Indian rupee against the US dollar has added fuel to the price of Indian cotton. Trading enterprises and exporters have little room for relaxation and bargaining. A little carelessness will lead to a situation of losing everything.

Second, the number of foreign businessmen and traders operating in Indian cotton has decreased significantly. According to the survey, since 2013, there have been fewer and fewer international cotton merchants operating and operating Indian cotton, and Indian ginning enterprises directly exporting cotton have gradually disappeared. There are not only the reasons for the decline in export volume caused by the sharp increase in domestic cotton consumption demand in India, but also the sharp rise and fall of cotton prices, indian cotton farmers, cotton processing enterprises, exporters often unilaterally raise prices, delay shipment, breach of contract or large-scale cancellation of supply contracts and so on to international cotton merchants, buyers and other factors, so in recent years, the main business of Indian cotton is less and less.

Third, Indian companies estimate their domestic cotton consumption capacity on the high side. According to the latest USDA monthly report, India's domestic cotton consumption in 2017/18 was about 5.389 million tons, up 218000 tons from 2016/17, while the statistics of relevant Indian ministries were more optimistic.

Fourth, India's cotton planting costs, labor wages and other taxes, financial costs, etc. rose significantly.. According to the survey, in recent years, the wages of Indian workers, the price of agricultural materials, the input of cotton planting, and the cost of financing have been rising. In Southeast Asian countries, the cost advantages of cotton, spinning, weaving, and clothing have declined in an all-round way, just like China after 2010, it is in a bottleneck period of transformation.

Source: First Agricultural Economic Co-operation | Release Date: 2017-07-28 | Responsible Editor: Zhai Tianchang