The Russian invasion of Ukraine has been escalating in the past few days.

The European Union and other major countries have imposed sanctions on Russia.

Due to these conditions, the world economy is in peril.

It has been a highly volatile situation for major economies including the Indian markets.

Ukraine and Russia play an important part in the production and exports of Energy and Food.

Mostly to the European Union.

With current conditions, the existing supply chains have been disrupted.

The price of essentials, commodities, and energy (including cotton and other raw materials) is expected to rise substantially.

This will have a tailspin effect on the global markets.

Impact on the Cotton prices

Cotton prices have been highly volatile in recent months.

Since the pandemic, the prices have nearly doubled.

Even though volatile, the prices of cotton are in an upward trend.

Southern India Mills Association (SIMA) chairman Ravi Sam said, “Due to unprecedented increase in domestic cotton price, from 135/kg to 219/kg in a year, an increase of around 65%, mills are struggling to meet export commitments.”

He also pointed out that the industry is expected to see a shortage of 30 to 40 lakh bales of cotton shortage.

SIMA has urged the government to allow duty-free import of 40 lakh bales to avoid production stoppage and job losses.

The rise in Energy & Food Prices

Many European countries are heavily dependent on Russian energy.

Particularly natural gases and crude oil.

Till now, the energy distribution has not been disrupted but the scenario is likely to take place.

Hence, the prices for energy are rising.

People are likely to come under higher prices for essential food items like bread, corn, chicken, eggs, and oil.

EU countries, Turkey, Egypt, etc will have to bear this rise in prices as the tension escalates.

An alternate scenario from Punjab

Even when cotton prices have doubled in recent months, buyers are now becoming more cautious due to the risk of loss of demand.

Prices in Punjab have crashed to Rs. 10 per kilo.

The price hike that is expected in the European region will decrease the demand for items like apparel and other cotton products.

With prices of energy, food, and other basic amenities skyrocketing, people will hesitate to spend on secondary needs like apparel and other cotton products.

“It seems as if they have bombed my cotton storage house,” said Jagjeet Singh Dhaliwall, a farmer from village Achariki in Fazilka.

Apart from this, mill owners have started visiting villages to buy directly from farmers.

But farmers are hoarding to make a good return on their hard work.

Conclusion

In recent days, global cotton prices have seen slight corrections but are still on an upward trajectory.

Indian domestic production has become challenging because of the unavailability of raw materials and the mills are requesting the government to waive off duties on cotton imports.

There is a growing fear among exporters regarding the decline of demand for cotton products like apparel and home textiles as the prices for essentials are set to increase in the EU countries.

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