Cotton inventory to dip to 35L bales this season

20 Jan 2011 Evaluate

The minimum balance stock of cotton will drop to 35 lakh bales in the current crop season, putting price pressure on domestic mills that pay Rs 50,000 per candy (a candy weighs 356 kg). The ending stock that has already come down to 44.5 lakh bales (each of 170 kg), way below the mandated 50 lakh bales, would further fall owing to late crop arrivals and possible exports.

The cotton-dependant $62-billion Indian textile and clothing sector will have 329 lakh bales of crop this season. Of that, 58.5 lakh bales have already been exported while the ending stock needed to maintain a healthy balance has come down to 44.5 lakh bales. The textile ministry is adamant that a balance of 55 lakh bales must be maintained as an ending stock. But, with the Directorate General of Foreign Trade issuing fresh licenses to export 19 lakh bales, the exports have exceeded 58 lakh bales, squeezing the ending stock.

Cotton supplies have not kept up with expectations. So far, 162 lakh bales have arrived in the market. Although the supplies are better than last crop year when 152 lakh bales had arrived by this time, the consumption by Indian mills has gone up significantly. Mills now require about 25 lakh bales of cotton per month against 20-23 lakh bales about a year ago.
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