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Soaring cotton prices threaten global economy

Cotton is quickly getting added up to the list of scarce commodities. Cotton is the basic raw material for many value added products in the textile sector. The recent past has seen a drastic increase in the prices of raw cotton. International cotton scenario witnessed an upturn during the past few months. Due to this unprecedented hike in cotton prices, farmers have suffered huge losses, which resulted in a lower acreage of cotton. While US continues to move higher in a steady manner, local markets in China, Pakistan, and India prices exploded and traders are trying to cover short positions.

Mr. A. Sakthivel, President, FIEO/TEA proposes the Indian Government to strike a balance between the volume of raw cotton to be exported, and availability of the same to fabric, and garment exporters. The Government may consider allowing 50 lakh bales for exports in a year with monthly ceiling of 4 lakh bales so that raw cotton exporters ensure regular export supply to maintain their markets and simultaneously ensuring adequate supply of raw cotton at reasonable price to end user domestic industry. He speculates a further increase in the prices of cotton as the exporters have purchased nearly 20 lakh bales of cotton.

In an exclusive interview with Fibre2Fashion, Mr. P G Makhija, Executive Director of GAEL (Gujarat Ambuja Exports Limited) said, Cotton exports must be banned and that Government should prevent hoarding of raw cotton to overcome crisis in the domestic cotton market.

Textile exports of Pakistan saw a remarkable improvement due to the shipments of raw cotton and cotton yarn.

However, these products have become a matter of concern for the value-added textile products due to elevated prices of these items. In the Chinese market, future contracts for May 2010 surged by RMB 210 per ton to RMB 15,620 per ton. According to cotton experts of China, cotton crop in the country is expected to reduce by 10 % during the current year, which is approximately 7 million ton less. Despite releasing 500,000 tons of cotton from its state reserves, the dragon nation was not able to suppress the bullish price rally in the cotton markets.

Farmers from Bangladesh expect good results for their cotton crop with new varieties introduced in this season.Rupali HSC and Lalteer cotton varieties, which are less susceptible to pests, have the capacity to produce two times more volume of cotton than the CB-9 and CB-10 varieties. These varieties can produce maximum 7 tons per hectare, or 7 to 8 maunds per bigha, while high-yield Rupali HSC and Lalteer varieties can produce 18 to 20 maunds. Bangladeshi farmers are optimistic about an increase in price between Tk 2,200 and Tk 2,400 per maund, this year, which is comparatively higher than the Tk 1,800 to Tk 2,000 per maund of the previous years. They are expecting to generate a profit of Tk 15,000 per bigha, during current season.

In Zimbabwe, soaring prices of cotton lint and high duty imposed on imported raw materials and other inputs have caused many textile companies to collapse. This poses a threat of massive job losses and a failure in tapping the export market. Mr. T Gutu, Chairman of Textiles Manufacturers Association of Zimbabwe, while sharing his views regarding the same with Fibre2Fashion, stated, The reason behind rising cost of cotton in Zimbabwe is two-fold. Our exchange rate is fixed by the state, and we have a hyper-inflationary economy. Increasing price is therefore an inevitable trend. In addition, the international price of lint has appreciated with the devaluation of the US dollar, and hence in real terms commodity prices will follow suit.

Added: December 03, 2009 Source: Agencies







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