Prices Of Quality Cotton Fiber, Yarn Surge As Traders Hold On To Their Stocks

Market Intelligence

Prices Of Quality Cotton Fiber, Yarn Surge As Traders Hold On To Their Stocks

Cotton

India's local cotton prices witnessed an upward trend during second half of May. Though the fiber prices have eased in the previous fortnight, the trend reversed backed by demand for good quality fiber. While Indian spinning mills have imported record volume of raw cotton during the current season, it seems the industry has an appetite for more. The demand for cotton and cotton yarn has improved but availability of good quality cotton has significantly declined which eventually lead to rising of fiber prices again. As the cotton arrival has ceased and fresh cultivation has started, it is assumed that traders have a hold on to their stock of cotton. So, in spite of producing excess cotton, the availability is an issue which has helped the prices to move north. Current domestic price for benchmark Shankar-6 variety is around Rs. 42900 per candy (355.6kg, on 26th May 2017). This is higher by Rs 1100 per candy if compared to mid-May prices.

On the global front, cotton prices remained strong but prices were volatile and declined few notches as prediction of bumper crop by USA hit the market. It is estimated that USA will harvest the largest crop in last ten years during the upcoming season. However, current demand seems to be strong from the export markets which mean that cotton prices would not decline too low. This month USDA has made the forecast available for the 2017-18 cotton season. It indicates a substantial increase in production and consumption of the fiber. USDA's forecast for upcoming season indicates that world cotton production to be at 113.2 million bales up from current seasons' estimates of 105.9 million bales (of 480 lb). Consumption estimates increased to 115.8 million bales from current seasons' 113.2 million bales while ending stock to decline to 87.1 million bales (from current seasons' 89.5 million bales).

To look at the price trend, 'A' index witnessed some fluctuations and declined towards the month end. The index touched this seasons' high of 89.1 US cents per pound on 3rd May and then declined to 87.10 US cents per pound towards May end (26th May). 'A' Index was at 78.55 US Cents in December 2016 end and was at 69.55 US cents per pound in December 2015 end.

On the yarn front, cotton yarn prices continue to remain strong backed by higher cotton prices. It is also witnessed that buyers have adjusted to the elevated yarn prices and traded volumes have grown. The demand for cotton yarn may remain steady in the coming fortnight.

Cotlook 'A' Index: 87.10 (As on 26th May 2017)