analysis of fluctuation in prices of raw cotton
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Analysis of Fluctuation in Prices of Raw Cotton &
Cotton Yarn
Presented by:Prabhjot Kaur94972238294
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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
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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…
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Set up: 1965Steel:1973Sewing thread:1982 Fabric weaving:1990Acrylic fiber: 1999
VARDHMAN Group
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“TO BE GLOBALLY RECOGNIZED
AS A LEADING SUPPLIER OF
QUALITY PRODUCTS.”
Vision
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“BEING WORLD CLASS SPINNERS BY
PROVIDING HIGHEST QUALITY PRODUCTS
WITHIN MINIMUM COST”.
Mission
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Flame
Stick
V
Logo of Vardhman Group
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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
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State Number of
units
Punjab 8
Himachal Pradesh 9
Madhya Pradesh 5
Gujarat 1
Tamil Nadu 1
Group Units
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Yarn
Fabric
Sewing thread
Acrylic fiber
Steel
Products
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Organizational hierarchy
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MIS
Exports
Finance
Marketing
HR
Taxation
EDP & IT
Projects & Planning
Functions of departments
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STRENGTHS
Good Brand Equity.
Good technological base with Foreign
Collaboration.
High Quality Standards.
Increasing Production Capacity.
Own Research and Development department.
SWOT Analysis
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WEAKNESSES
Comparatively high prices.
Lesser degree of promotional activity.
Long Hierarchy.
Cont…
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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…
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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…
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TITLE“Analysis of Fluctuation in Prices of
Raw Cotton & Cotton Yarn”
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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
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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
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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
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Data Analysis
&
Interpretation
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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 -
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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
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Rate before ban Rate after ban Change0
5000
10000
15000
20000
25000
30000
35000
2870028000
700
Effects on prices after ban on export
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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
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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….
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Graph: shows the source of supply of raw cotton
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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
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Graph: shows the causes of fluctuation in raw cotton prices
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Graph: shows prices are fallen below minimum support price
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Graph: shows environment which affects on cotton prices
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Graph: shows basis on which customer buys the product
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Graph: shows demand of raw cotton in current season.
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Graph: shows time period of maximum supply of raw cotton.
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Graph: shows whether the cotton development programs are conducted.
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Graph: whether cotton development programs are beneficial for promoting the cotton industry.
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Table: shows whether recession affect on cotton prices
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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
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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
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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
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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…
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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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