Analysis of Fluctuation in Prices of Raw Cotton &

Cotton Yarn

Presented by:Prabhjot Kaur94972238294

Textile industry is one of the India’s oldest

industry.

It is the second largest employment

generator .

The industry uses a wide variety of fibers .

India contributes to around 12 percent of

the world's production of cotton yarn and

textiles.

Introduction to Textile Industry

Contributes about 34% of total exports.

India is the second largest producer of

raw cotton & cotton yarns and fifth in

production of synthetic fibers.

Cont…

Set up: 1965Steel:1973Sewing thread:1982 Fabric weaving:1990Acrylic fiber: 1999

VARDHMAN Group

“TO BE GLOBALLY RECOGNIZED

AS A LEADING SUPPLIER OF

QUALITY PRODUCTS.”

Vision

“BEING WORLD CLASS SPINNERS BY

PROVIDING HIGHEST QUALITY PRODUCTS

WITHIN MINIMUM COST”.

Mission

Flame

Stick

V

Logo of Vardhman Group

Largest exporter of cotton yarns.

Largest range of textile products.

Second largest producer of sewing

thread in the country.

First in Indian textile industry to get ISO

certification in yarns and sewing thread.

Major Highlights

State Number of

units

Punjab 8

Himachal Pradesh 9

Madhya Pradesh 5

Gujarat 1

Tamil Nadu 1

Group Units

Yarn

Fabric

Sewing thread

Acrylic fiber

Steel

Products

Organizational hierarchy

MIS

Exports

Finance

Marketing

HR

Taxation

EDP & IT

Projects & Planning

Functions of departments

STRENGTHS

Good Brand Equity.

Good technological base with Foreign

Collaboration.

High Quality Standards.

Increasing Production Capacity.

Own Research and Development department.

SWOT Analysis

WEAKNESSES

Comparatively high prices.

Lesser degree of promotional activity.

Long Hierarchy.

Cont…

OPPORTUNITIES As quality is good and prices are comparatively

high, Vardhman can always easily liquidate stock pressure by slight reduction in prices.

Strict payments are strengths at times as well as weakness. If a moderate policy, as per present conditions are adopted, the dealers and customers shall be attracted to buy more and regularly.

Shortened hierarchy shall provide hope for better customer service.

Cont…

THREATS Smaller players in the market are using

Vardhman’s process as a shield to push their product at lower prices.

Capacity of Yarn Spinning is increasing rapidly in comparison to increase in market size, resulting into the addition of new players. This would result in price cuts, liberalization of payment, terms and conditions etc. the various functional areas.

Cont…

Current ratio

2007-08 2008-09 2009-10

Current assets (Rs. Lac)

153628.45 161172.29 203654.93

Current liabilities (Rs. Lac)

26204.85 24142.11 26702.47

Current ratio 5.86 6.67 7.62

Quick ratio

2007-08 2008-09 2009-10

Quick assets (Rs. Lac)

66592.12 99162.24 92909

Current liabilities (Rs. Lac)

26204.85 24142.11 26702.47

Quick ratio 2.54 4.1 3.47

Debt-Equity ratio

2007-08 2008-09 2009-10

Debt (Rs. Lac)

239123.43 394594.29 262079.79

Shareholders’ fund (Rs. Lac)

117213.90 127275.03 145584.96

Debt-Equity ratio

2.04 1.95 1.8

Turnover of Vardhman group

2005-06 2006-07 2007-08 2008-09 2009-10

Turnover(Rs. Crore)

1957.25 2159.24 2346.36 2495.38 2767.22

250

750

1250

1750

2250

2750R

s.

Cro

re

Segment revenue for 2009-10

10%

6%

20%

7%

3%

54%

Revenue of segments(Rs. Crore)

Sewing Thread Steel Fabric Acrylic Fibre Unallocated Yarns

TITLE“Analysis of Fluctuation in Prices of

Raw Cotton & Cotton Yarn”

To understand the domestic and international market of

raw cotton and cotton yarn.

To analyze the fluctuations in prices of raw cotton and

cotton yarn.

To find out the basic reasons for the fluctuations in

prices of raw cotton.

To determine the impact of price on the demand of

cotton.

Objectives

Research design: Descriptive

Data collection: Primary & Secondary

Universe: All the suppliers who supply raw cotton.

Population: All the suppliers who supply raw cotton to

Vardhman.

Sampling design: Convenience.

Sampling unit: Any respondent who is working with Vardhman

as supplier of raw cotton.

Sample size: 10

Research Methodology

Data collection error may be there due to wrong

response from respondents as some time they

are not the right person who takes actual

decisions.

Some of the respondents can hide the real

information.

Sample size cannot always represent the whole

population as sample size is 10 only.

Limitations of the study

Data Analysis

&

Interpretation

2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/100

50000

100000

150000

200000

250000

Area Harvested

Beginning Stocks

Production

Imports

Total Supply

Exports

Consumption

years

1000

HA

& 1

000,

480

lb. B

ales

World cotton balance sheet

2006/07 2007/08 2008/09 2009/100

5

10

15

20

25

30

35

40

China India

United States Pakistan

Brazil Uzbekistan

Turkey Australia

Years

Mil

lion

s of

480

Lb.

Bal

es

World cotton production

 People's Republic of China 32.5 million bales

 India 23.5 million bales

 United States 12.2 million bales

 Pakistan 9.9 million bales

 Brazil 5.8 million bales

 Uzbekistan 4.0 million bales

 Australia 1.8 million bales

 Turkey 1.6 million bales

 Turkmenistan 1.1 million bales

 Syria 1.0 million bales

Top 10 cotton producers

2006/07 2007/08 2008/09 2009/100

2

4

6

8

10

12

14

16

United States

India

Uzbekistan

Brazil

Australia

Years

Mil

lion

of 4

80 L

b. B

ales

World cotton export

2006/07 2007/08 2008/09 2009/100

10

20

30

40

50

60

China

India

Pakistan

Turkey

Brazil

Bangladesh

Years

Mil

lion

s of

480

Lb.

Bal

es

World cotton consumption

2006/07 2007/08 2008/09 2009/100

2

4

6

8

10

12

14

China

Bangladesh

Turkey

Indonesia

Pakistan

Thailand

Vietnam

Mexico

South Korea

Taiwan

Russia

India

Egypt

Hong Kong

Iran

Years

Mil

lion

s of

480

Lb.

Bal

es

World cotton imports

Area, Production and productivity of cotton in India during last ten years

Year Area in lakh hectares Production in lakh bales of 170 kgs Yield kgs per hectare

2000-01 85.76 140.00 278

2001-02 87.30 158.00 308

2002-03 76.67 136.00 302

2003-04  76.30 179.00 399

2004-05 87.86 243.00 470

2005-06  86.77 244.00 478

2006-07 91.44 280.00 521

2007-08 94.14 307.00 554

2008-09 94.06 290.00 524

2009-10 101.71 292.00 488

Source : Cotton Advisory Board

Area, Production & Productivity of cotton in India

2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-090

500

1000

1500

2000

2500

3000

2310

1901

2323

2632

2037 2058

2280

2613

2850

S-6

S-6

Year

pri

ce(R

s./

Quin

tal)

Annual average prices of Shankar-6

1/4/

2009

15/4

/200

9

30/4

/200

9

15/0

5/20

09

30/0

5/20

09

15/0

6/20

09

30/0

6/20

09

15/0

7/20

09

30/0

7/20

09

15/0

8/20

09

30/0

8/20

09

15/0

9/20

09

30/0

9/20

09

15/1

0/20

09

30/1

0/20

09

15/1

1/20

09

30/1

1/20

09

15/1

2/20

09

30/1

2/20

09

15/0

1/20

10

30/0

1/20

10

15/0

2/20

10

28/0

2/20

10

15/0

3/20

10

31/0

3/20

100

5000

10000

15000

20000

25000

30000

Year

Pri

ce(R

s./

candy)

Rates of domestic cotton(S-6) throughout the year 2009-10

2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-100

5

10

15

20

25

30

35

40

Punjab

Haryana

Rajasthan

Gujarat

Maharashtra

Madhya Pradesh

Andhra Pradesh

Karnataka

Tamil Nadu

Years

Lak

h H

ecta

res

State wise area coverage

2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-100

20

40

60

80

100

120

Punjab

Haryana

Rajasthan

Gujarat

Maharashtra

Madhya Pradesh

Andhra Pradesh

Karnataka

Tamil Nadu

Years

Lak

h B

ales

of 1

70 K

g.State wise production of cotton

COTTON BALANCE SHEET

The Cotton Balance Sheet for 2009-10 vis-a-vis 2008-09 as drawn by Cotton Advisory

Board vide its meeting dt.08-04-2010 as under:

Quantity in lakh bales of 170 kgs each

Item 2009-10 2008-09

SUPPLY

Opening stock 71.50 35.50

Crop size 292.00 290.00

Imports 7.00 10.00

TOTAL AVAILABILITY 370.50 335.50

DEMAND

Mill Consumption 207.00 190.00

Small-Mill consumption 23.00 20.00

Non-Mill Consumption 20.00 19.00

TOTAL CONSUMPTION 250.00 229.00

Exports 80.00 35.00

TOTAL DISAPPEARANCE 330.00 264.00

CARRY FORWARD 40.50 71.50

4/1/

2009

16/0

4/20

09

2/5/

2009

21/0

5/20

09

2/6/

2009

20/0

6/20

09

2/7/

2009

14/0

7/20

09

4/8/

2009

28/0

8/20

09

2/9/

2009

18/0

9/20

09

2/10

/200

9

21/1

0/20

09

3/11

/200

9

19/1

1/20

09

2/12

/200

9

19/1

2/20

09

1/1/

2010

18/0

1/20

10

2/2/

2010

25/0

2/20

10

4/3/

2010

22/0

3/20

10

31/0

3/20

100

10

20

30

40

50

60

70

80

90

100

COT LOOK INDEX A

Year

Pri

ce(U

S C

ents

per

lbs)

Rates of the international cotton yarn

1/4/

2009

15/4

/200

9

30/4

/200

9

15/0

5/20

09

30/0

5/20

09

15/0

6/20

09

30/0

6/20

09

15/0

7/20

09

30/0

7/20

09

15/0

8/20

09

30/0

8/20

09

15/0

9/20

09

30/0

9/20

09

15/1

0/20

09

30/1

0/20

09

15/1

1/20

09

30/1

1/20

09

15/1

2/20

09

30/1

2/20

09

15/0

1/20

10

30/0

1/20

10

15/0

2/20

10

28/0

2/20

10

15/0

3/20

10

31/0

3/20

100

20

40

60

80

100

120

140

160

180

COTTON YARN (COUNT 30)

Year

Pri

e(R

s./

cone)

Rates of the domestic cotton yarn

2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10*0

5

10

15

20

25

30

World Beginning stockWorld Cotton ProductionWorld Cotton ConsumptionWorld Cotton ExportsWorld Ending stocks

World Demand & Supply Situation

WORLD COTTON PRICES

Monthly average Cotlook A Index (FE) from 2004-05 onwards

2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

FE Index in US Cents per lb.

August 51.91 53.23 59.88 66.62 78.04 64.14

September 55.03 53.94 58.82 68.12 77.09 63.99

October 50.89 57.74 57.03 68.93 62.30 66.82

November 47.71 55.87 57.39 69.68 54.96 71.78

December 47.51 56.09 59.43  69.52 55.47 76.78

January 50.23 58.36 59.06  73.21 57.71 77.39

February 48.69 59.66 57.86 75.05 55.21 80.05

March 55.34 57.59 58.42 80.18 51.50 85.80

April 55.99 56.23 57.13 75.44 56.78 88.08

May 54.90 54.35 55.57 74.12 61.95 90.07 

June 52.66 55.14 60.61 77.04 61.39  93.04

July 53.17 55.42 67.84 77.29 64.80 - 

BEFORE AFTER Difference0

5000

10000

15000

20000

25000

30000

35000

2900028200

800

Time Period

Pri

ce(R

s.)

Effects on raw cotton prices after Govt. restrictions on raw cotton exports to stabilize prices-9/4/10

Rate before ban Rate after ban Change0

5000

10000

15000

20000

25000

30000

35000

2870028000

700

Effects on prices after ban on export

the Government withdrew the 7.67%

concession (exports benefit) given to cotton yarn

exporters under the Duty Entitlement Pass Book

(DEPB) scheme vide notification dated 21.04.2010.

the Government withdrew the 4% concession

(exports benefit) given to cotton yarn exporters

under the Duty Drawback Scheme vide notification

dated 29.04.2010.

Govt. decisions to control cotton yarn exports

the prices of cotton yarn in the domestic

market will be reduced by at least Rs. 5/-

per kg. in the short run and Rs. 10-15/- in

the long run.

Cont….

Graph: shows the source of supply of raw cotton

Table: shows, whether prices are manipulated by the farmers or not.

response No. of respondents contribution mean score

strongly agree(5) 1 5

3.1

agree(4) 2 8

neutral(3) 4 12

disagree(2) 3 6

strongly disagree(1) 0 0

Graph: shows the causes of fluctuation in raw cotton prices

Graph: shows prices are fallen below minimum support price

Graph: shows environment which affects on cotton prices

Graph: shows basis on which customer buys the product

Graph: shows demand of raw cotton in current season.

Graph: shows time period of maximum supply of raw cotton.

Graph: shows whether the cotton development programs are conducted.

Graph: whether cotton development programs are beneficial for promoting the cotton industry.

Table: shows whether recession affect on cotton prices

Table: shows to what extent recession affected the prices of cotton

response no.of respondents contribution mean score

very largely(5) 1 5

4.1

largely(4) 9 36

neutral(3) 0 0

less(2) 0 0

very less(1) 0 0

Table: shows the opinion of suppliers in context of fluctuation of cotton price in future.

response no. of respondents contributionmean

score

strongly agree(5) 1 5

3.9

agree(4) 7 28

neutral(3) 2 6

disagree(2) 0 0

strongly disagree(1) 0 0

Cotton exports are freely allowed, and rightly so, this makes domestic cotton prices follow international prices. Cotton accounts for 65-70 per cent of the yarn cost and a 35 per cent increase in cotton prices means a 20 per cent increase in yarn prices.

Power constitutes the second most important element of cost; this has gone up by 30- 40 per cent due to power cuts and the need to buy power from the open market or generate it using liquid fuels. For mills that pay the full cost of power, it accounts for 15 per cent of the yarn cost in normal conditions; in today's situation, it is as high as 20-21 per cent.

Findings

There is going to be an increased shortage of

yarn in days to come, as the per consumption is

increasing day by day in India.

Biological factors are considered as the most

important factors which influence cotton prices.

Demand is fluctuating as the prices are not stable

and in future prices are lightly to rise.

Cont…

From the study it is concluded that government restrictions

played a vital role in controlling the cotton and cotton yarn

prices.

In order to control the rising in international export of

cotton yarn, government had to impose restrictions, which

resulted in fall in price.

Study also concludes that there will be rise in cotton prices

in future as well. Biological factors and other factors have

also been responsible for fluctuation in prices of cotton.

Conclusion

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