A rise of about 40 per cent in cotton prices over the past two months has hit both small and big spinning mills as yarn prices are up only 10 to 15 per cent. Many fabric mills have opted for blends of synthetic yarn, which is much cheaper than cotton yarn. This has aggravated the problem for cotton spinners.

For big entities, blended yarn is not a sustainable option. Only a small segment of garment makers has substituted blended for cotton yarn. And over-production of blended yarn might mean a glut in the market. At the end of the season, there do arise supply shortages but this year it has crossed all barriers, due to aggressive buying by hoarders. Multinational bulk buyers with access to cheap funds hoard cotton during high arrival days. As the yarn market is not aggressive, mills cannot pass on the entire cost increase on to the buyers.

Mills in Tirupur have resorted to import of cotton from Australia and Africa. However, it takes 35 to 60 days for order delivery and only a few spinners who’d anticipated a huge jump this year could order for imported cotton in time to reap the benefits. This option is not available to spinners in the north, as the distance from ports adds freight charges, making imported cotton unviable. Small mills which economise on maintaining inventory are hurt the most.