By Madhvi Sally

New Delhi: Domestic cotton prices have increased about 5% in the past one week and may remain firm as buying by spinning mills and overseas firms has picked up, traders said.

“The domestic demand of cotton has seen an increase with most of the spinning mills now running at 80% capacity. We anticipate the domestic yarn demand to see an improvement with the festive season approaching. Also, there is a big participation by MNCs to procure cotton which has further escalated the prices,” said Mahesh Sharda, president, Indian Cotton Association.

Since the Cotton Corporation of India (CCI) started auctioning cotton about a month ago it has been able to sell almost 50 lakh bales of 170 kg each and the prices have risen from Rs 36,500 to Rs 38,000 per candy of 356 kg. This has led to an increase in domestic prices by 5%, said Sharda.

Overseas firms such as Louis Dreyfus, Olam, Cargill and Glencore are bidding for the Cotton Corporation of India (CCI) stock, said Anand Popat, a cotton commission agent at Rajkot mandi. “There is demand by most spinning mills which are holding two to three-week stock and prices have increased by 5% in the past one week to RS 37,000 per candy,” he said.

Firm global prices, lack of cotton in open market and weather risk were also attributing to the increase in prices in the domestic market, said Prerana Desai, head of research at Edelweiss Rural and Corporate Services Ltd. “We can expect prices to remain firm till the new crop arrives at the end of September,” she said.

Garment manufacturers Sanjay K Jain, MD of New Delhi based TT Limited, said this sudden spurt in cotton prices by 6% in just a few days has taken the industry by surprise. “We have all time high cotton stock, international prices are stable, demand for end products is still muted but still such a sudden jump seems to be due to cornering of cotton by selected few in the end season,” he said.