The Indian textile industry has been expressing concern over the rising cotton prices in
domestic and international markets. Textile manufacturers in India looking for cotton fabric material online must be aware of these changes before placing their bids on TEXchange. Cotton prices
fluctuate for various reasons. In this blog, we will discuss how cotton price is determined in
India and the factors that knitted and woven fabric manufacturers must keep an eye on.
How is The Price of Cotton Determined in India?
Every year, the cotton season is commenced in October. Before the season starts, the Ministry
of Agriculture determines the Minimum Support Price (MSP) of two cotton seed varieties to
protect the cotton farmers’ interests.
The Cotton Corporation of India (CCI) is the single largest buyer and seller of cotton and thus
has the highest power to determine cotton prices in the mandi. Every day, the CCI announces
the selling price of cotton, which becomes the maximum price for all, including textile
manufacturers in India and international cotton fabric buyers.
While deciding the MSP, factors like production cost, overall demand-supply situations,
trading terms, impact on the economy, production resources, and usage of land and water are
considered by the Commission on Agricultural Costs and Prices (CACP).
Factors that Affect the Cotton Prices in India
Cotton prices remain the same whether buying wholesale fabric online or conventionally
through Damodar Menon International. Major factors that influence the price of cotton fabric
are:
- Production: Risks associated with farming and harvesting cotton crops, such as
weather conditions, pests, diseases, water supply, etc., directly impact cotton
production in the long term. - Domestic Economic Factors: Cotton prices can be influenced by the country’s
economic trends and indicators. Inter-crop price parity, demand-supply situation, and
international market situation are a few major factors that affect the prices relating to
the domestic economy. - Government Policies: Subsidies, tariffs, regulations, and other policies set by the
government can affect the production capacity and costs, ultimately determining the
cotton price. For instance, cotton subsidies have remained one of the controversial
issues in international trade at the World Trade Organization (WTO). Farmers of least
developing countries often protest that developed countries’ support, especially the
USA, has made cotton manufacturing uncompetitive in the global south. - Share Speculations: Trading activities can heavily impact cotton prices, as
speculative buying can create volatility. Cotton futures and commodity markets
initiate trading activities by attracting speculators and investors. - Quality of Cotton: Woven fabric manufacturers strive to gain the best prices for
cotton fabric material online by assessing the quality of the crop. Cotton quality is
evaluated based on fibre properties, colour, and length. - Global Trading Markets: TEXchange and other global commodities markets, where
cotton (greige, RFD, and organic) is traded among buyers and sellers every day, have
the maximum impact on the price of cotton. These markets represent updated, real-
time demand and supply of cotton all over the world. - Weather Conditions: Adverse weather conditions, such as floods, drought, and
storms, can reduce crop yields and disrupt the demand-supply chain, which invariably
leads to higher prices. - Demand for Alternative Textiles: The demand for other fibres like modal, viscose,
and synthetic fibres like chiffon and georgette can affect the price of wholesale fabric
online. This happens when there’s a shift in consumer preferences, fashion trends, and
market needs.
However, at present, the demand for cotton is more than ever due to the preferences of
eco-conscious consumers, who favour organic cotton and sustainable materials over
synthetics.
It is important to remember that these abovementioned factors can influence and interact with
each other, resulting in very complex dynamics in the cotton industry and global textile
trading.
Improve your cotton business in the global market by registering on TEXchange Global for
free, a premiere platform that connects textile manufacturers in India and cotton traders
worldwide.
