Worry in India as cotton prices take a hit in US-China trade war

In the ongoing trade war between China and the US, cotton prices have taken a hit of more than 32 percent in the international market in the past one year. 

And the crash in prices in the global market has reflected in the domestic market, with the Indian futures market recording a 16 percent fall in cotton prices.

"The US-China trade war has badly affected the Indian cotton market. The US is the world's biggest cotton exporter and China its bigger consumer. 

The tussle between these two big business partners has hurt cotton market across the world, including India, which is the world's largest cotton grower," said Arun Shekhsaria, Director, DD Cotton Private Limited.

"Chances of recovery at present are few. So we expect the prices in the Indian market to crash further," said Dilip Patel of Kadi (Gujarat)-based S. Raja Exports Private Limited. 

During the last business session on the country's largest futures market Multi Commodity Exchange (MCX) on August 2 (Friday), the August contract closed at Rs 20,060 per bale (Rs 170 kg) with a 2.48 percent or Rs 510 fall over the previous session.

Cotton was priced Rs 23,990 per bale on the MCX on August 2, last year. Therefore, the price has seen a fall of Rs 3,930 per bale or 16.38 percent in the past year.

According to sources, the benchmark Gujarat Shankar-6 (29 MM) variety of cotton traded at Rs 42,000-42,300 per candy (356 kg) this week against a price of Rs 46,700 and above per candy during the same period last year.

On the US' Intercontinental Exchange (ICE) on August 2 (Friday), the December contract for cotton closed with a 2.95 cent fall of 4.73 percent at 59.42 cents per pound. 

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Cotton price on the ICE was 88.17 cent per pound during the same period last year. Therefore cotton prices on the ICE registered a 32.62 percent fall in the past year.