During the past one week, domestic cotton prices increased about 5 per cent and may remain firm as buying by spinning mills and overseas firms has picked up, traders say. Most spinning mills in the country are running at 80 per cent capacity, said Mahesh Sarda President, Indian Cotton Association. The Association anticipates domestic yarn demand to improve with the festive season approaching.

Cotton Corporation of India (CCI), which started auctioning cotton about a month ago, has been able to sell almost 50 lakh bales of 170 kg each and prices have risen from Rs 36,500 to Rs 38,000 per candy of 356 kg. This has led to an increase in domestic prices by 5 per cent. Overseas firms such as Louis Dreyfus, Olam, Cargill and Glencore are bidding for the Cotton Corporation of India (CCI) stock in Rajkot mandi.

Firm global prices, lack of cotton in open market and weather risk were also attributing to the increase in prices in the domestic market, said Prerana Desai, Head-Research, Edelweiss Rural and Corporate Services. She expects prices to remain firm till the new crop arrives at the end of September.

Garment manufacturers Sanjay K Jain, Managing Director, TT Ltd, said this sudden spurt in cotton prices by 6 per cent in just a few days has taken the industry by surprise. He attributed this sudden jump in prices to cornering of cotton by selected few in the end season