The currency imbroglio that is currently experienced in India following a cash shortage is hurting the cotton trade. With farmers seeking to sell their produce only in cash, the scarcity of notes has led to daily cotton arrivals declining by almost 50 per cent.
Farmers usually prefer cash for their produce and are not familiar with other forms of payments. Hence, due to demonetisation, traders and ginners are unable to make payments to farmers in hard cash. The price of cotton has gained almost five per cent recently.
Most buyers are avoiding large purchases, which has led to a fall in demand from yarn mills. On the other hand, demand is higher than supply and cotton prices have gone up in the last two days and may continue to stay high till the situation normalises.