High Cotton Prices Hit Textile Mills

Cotton prices have shot up 25% since July due to low cotton stocks - the resultof late rains in Gujarat, Maharashtra, and MP.

Cotton textile mills find themselves in a bind. Due to the late rains and theresultant late crop in major cotton producing states of Gujarat, Maharashtra, and Madhya Pradesh, mills are short on stock. "Compared to the same time last year, cotton prices are up about 35% and even compared to June and July this year cotton prices are up 25%," Vardhman Group chairman S P Oswal told
CNBC-TV18.

Oswal said the mills are nearly out of stock and have all converged on the market for fresh cotton purchases and that has also lifted cotton prices.

The steep rise in cotton prices is hurting mills badly, Oswal pointed out, saying that cotton makes 50% of the mills'' total cost of sales. "The margins will be adversely affected immediately," he said.

Even import of cotton would probably not give much relief to mills because international cotton prices are also firm because of significant damage to the cotton crop in China, which is the world''s biggest cotton producer and consumer.