Plunging cotton prices in India prompt half of ginneries to close
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Plummet cotton prices in India led to the closure of half of the cotton ginneries
Cotton prices in India fell 30% in two months, leading to the closure of 50% of ginning plants in Gujarat.
Cotton prices have fallen recently, which has dealt a fatal blow to cotton ginners, which gin and package the cotton. About 50% of cotton ginners in Gujarat, India’s largest cotton-producing and exporting state, have shut down due to the price shock. Most ginners expect cotton prices to rise.
Two months ago, cotton prices in Mumbai were at 63,000 rupees. Now they have plunged 30% to 43,000 rupees. Cotton was a good performing asset in 2010, returning over 60%.
Ginners buy cotton when the price is as high as 60,000 rupees/candy. They expect cotton to rise to Rs 65,000. However, the price collapse caused their cotton stocks to lose 25% of their value.
In order to force the government to expand export quotas, cotton ginneries went on indefinite strike last Sunday to protest against the 5 million bale export cap set by the government.
There are 1000 ginning mills around Saurashtra and Gujarat. Before the strike, 70% of the ginneries had been forced to close, and the remaining ginneries were open 3-4 days a week.
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