Local merchants and spinners expect the yarn market to stabilise thanks to a price fall in the global market amid rising supplies, especially from China, and higher cotton production.
Cotton, the main source for producing yarn, traded between 67.7 and 68 cents per pound in the international market yesterday, down from 71.8 to 72.8 cents a few days ago.
The widely consumed 30-carded yarn traded between Tk 100 and Tk 107 a pound in Bangladesh.
“This price level has been persisting over the last seven to eight months. We hope that the price will continue to decrease further as the price of cotton declined worldwide,” said Liton Saha, former president of the Bangladesh Yarn Merchant Association.
As the price of the fibre declined and the production increased, the consumption of cotton may go up in Bangladesh.
“Yes, our import and consumption of cotton will increase this year too, as in previous years,” said Mehdi Ali, general secretary of the Bangladesh Cotton Association.
The import and consumption of cotton in Bangladesh has been swelling over many years due to higher shipment of cotton-made garment items and increasing number of spinning mills in the country.
Both Ali and Saha stated that the price of yarn would remain stable in the country.
The latest report of the United States Department of Agriculture (USDA) also mentioned of higher crop production, price fall and higher import of cotton by Bangladesh in the cotton year of 2017-18.
The import of cotton in Bangladesh will increase by 100,000 bales from 7.1 million to 7.2 million bales in 2017-18, the USDA data showed.
One bale equals 480 pounds or 218 kg, and the cotton year begins on August 1 and ends on July 31. Bangladesh is the largest importer of cotton in the world after China stopped sourcing the raw material from outside of the country three years ago.
Local growers can meet less than 3 percent of the annual demand, leading to the imports worth over $3 billion.
The demand for the natural fibre is on the rise in Bangladesh as it is the only country that is still mainly dependent on raw cotton to make yarn and fabric.
Other countries have shifted to manmade fibres like filament, polyesters and viscose. As a result, the global consumption of cotton has been on the decline.
By the end of 2020, cotton consumption in Bangladesh will hit 7.9 million bales, said local importers. Currently, Bangladesh imports 55 percent of its demand for cotton from India, thanks to favourable prices, geographical proximity, shorter lead time and the quality of the fibre.
The global supply of cotton has been increasing as recently the State Reserve of China announced an extension of sales to September 29 from the previously scheduled August 31, as has been expected by many observers for some time.
If sales through the end of September maintain the rate seen so far, total sales will be about 13.3 million bales, the USDA said.
Due to a more optimistic yield forecast, this month's report featured a large increase to the US production number, with the projection rising by 1.5 million bales, from 19 to 20.5 million.
If realised, this would be the first crop year since 2006-07 that the US produced more than 20 million bales.
Even with a large upward revision to the 2017-18 forecast for US exports from 13.5 to 14.2 million bales, the addition to production caused the estimate for US ending stocks to climb significantly higher from 5.3 to 5.8 million bales.
The current projection indicates that US stocks at the end of 2017-18 will swell to more than twice the volume in storage at the end of 2016-17 from 2.8 million bales in 2016-17 to 5.8 million bales in 2017-18.
Global production increased by 1.9 million bales, from 115.4 million bales to 117.3 million bales. If realised, this would be the largest world harvest since 2014-15.
The global mill-use forecast was mostly unchanged by about 375,000 bales more, from 117 million bales to 117.4 million bales.
With the upward revision to global production exceeding the upward revision to global mill-use, the projection for global ending stocks increased by 1.4 million bales, from 88.7 to 90.1 million bales.
The lower price of cotton may affect garment prices as well, said Cotton Incorporated in an analysis. The sourcing costs of garment could decrease by 6 percent to 7 percent.
In reality, upward pressure on costs from rising wages and other non-fibre costs like that of dyestuffs may partially offset decreases in sourcing costs made possible by lower cotton prices, added Cotton Incorporated.