Annual Report 2021/2022
Cotton season 2021/22 was a very challenging one. Cotton market opened at its historically high level and climbed up to create a new historical high of Rs.100,000 plus per candy. Hence it proved that is very difficult for even experts to predict top and bottom of the cotton market. Market finds its own level.
Good cotton season for Ginners, farmers and stockists. First two quarters yarn market was supporting rising cotton prices and mills were earning but in second half of the season Indian cotton market rose to a very high level and yarn market could not catch up to that level. Indian cotton became the costliest cotton in the world. Due to the lowest domestic cotton crop in recent times, supply crunch became evident. Spinners tried to draw Governments attention to the issue and demanded to remove import duty on raw cotton but it was too late when government reacted to it. Leading cotton associations and COCPC were not able to rightly judge the cotton crop size. Initial cotton crop estimates were around 360 lakh bales which was lowered to 340 lakh bales in first quarter but daily arrivals were not supporting those numbers.
Cotton season 2020/21 was a golden period for spinners and they were running their factories at optimum level. 2020/21 domestic cotton consumption was historical high and 2021/22 domestic cotton consumption is the lowest in recent times.
Mills were trapped in on-call purchase. Mills were forced to square off their huge open on-call position before ICE old crop July future expiry. Roll over was costly as new crop December future was inverted to near 2100 points. From May onward ICE future was dominated by speculators and shot-up to 153 cents a pound level.
Indian cotton market was following rise in ICE futures but when ICE futures dropped after July option expiry, Indian cotton market remained strong and moved upwards due to domestic raw cotton shortage. Indian basis rose to record high of 5300 point against ICE December future and from here onwards Indian mills got out of the international yarn market competition. There after Indian mills had no other option but to slow production/consumption or shut down to save themselves from huge operating losses. Even at huge disparity it was difficult to find yarn buyer and also very low availability of raw cotton. First time in Indian history, mills closed due to unavailability of cotton and huge disparity in yarn.
We all learned a new lesson.