The Mintec price of Indian cotton reached INR 128/kg on 17th March 2021, up 21% y-o-y and 7% q-o-q on the back of a bullish trend in the international market.
Global cotton prices have been consistently trending upwards since June 2020 due to projections of lower sowing (for the 2021/22 crop) in major cotton-growing countries such as the US, Brazil, and India, thereby supporting Indian cotton prices. Another factor contributing to firm Indian cotton prices is the resuming global operations and high mill demand. Global 2021/22 consumption is expected to grow by 15% y-o-y to 117,546 (1000 480 lb. bales), as the world recovers from the severe 2020 economic downturn.
In Q1 2021 (between January and 17th March 2021), the Indian cotton price was around 9-10% lower than cotton prices in the US and Brazil. Accordingly, Indian cotton exports remained strong in Q1 2021 due to its competitive prices. In addition, significant volumes procured by the Cotton Corporation of India (CCI) have supported the domestic demand. In February 2021, the CCI purchased the equivalent of 6.9 million bales (480 lbs.) of lint cotton from the 2020/21 crop at the Minimum Support Price (MSP) of INR 55/kg. The total volume purchased by the CCI represents approximately 40% of the cotton sold to date by farmers and 25% of the USDA production forecast for the 2020/21 crop.
Indian cotton prices are likely to remain high in the short term as most of the cotton is already sold at higher than MSP to the CCI or other buyers. As per market participants, currently, only 15-20% of cotton is held by some farmers who aim to get higher prices during the monsoon season (June-August).