Domestic Cotton Buyers Look To New Season For Relief

Market Intelligence

Domestic Cotton Buyers Look To New Season For Relief

Cotton

Indian cotton prices remained stable during the second half of August. In fact, the fiber prices reflected stability throughout August. The reason being there are neither many buyers nor many sellers as demand has been slack and sellers are reluctant to sell at current price level. Local spinning mills that are shot of stock are buying hand to mouth as yarn demand is weak. Export scenario is not good as current local cotton prices are higher than the prevailing international prices. Also, buyers are waiting to buy fresh cotton from the upcoming season anticipating lower prices. India is expected to harvest another bumper crop this year as area under the cotton has increased by over 10% compared to last year and good monsoon is expected to result in 12-15% increase in production of the fiber compared to 2016-17 season. Despite the flood and pest attack, India will definitely produce larger crop than past season. On the other hand, domestic mill demand for the fiber is weak and buyers are expecting better price in the coming months. In the price front, current domestic price for benchmark Shankar-6 variety is around Rs. 42200 per candy (355.6kg, on 30^th August 2017) which is lower by just Rs 200 per candy if compared to mid-August prices.

On the global front, cotton prices witnessed little volatility during August second half. Fiber prices recovered marginally compared to last fortnight as there were news of crop damage in USA and India. A major hurricane hit Texas - a major US based cotton producing region. It is learned that this has damaged part of the harvested crops. Though actual damages are yet to be accessed, there is fear that sizable volume of cotton and cotton fields might get damaged in the rain. USDA’s data in next month would confirm the damages but last forecast for upcoming season indicates that world cotton production to be at 115.4 million bales up from earlier estimates of 114.7 million bales (of 480 lb). Consumption estimates increased to 117 million bales from earlier estimate of 116.5 million bales while ending stock to increase to 88.7 million bales.

To look at the price trend, ‘A’ index has recovered marginally in the last fortnight. A index move up to 80.30 US Cents per pound (on 30^th August). The index was at this season’s high of 94.9 US cents per pound on 15^th May. Historically, ‘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 remained stable but demand for the yarn has witnessed slackness. Also, buyers are negotiating for better prices while sellers are reluctant to revise. Many spinning mills in India have stopped production or are running at lower capacity.

Cotlook ‘A’ Index: 80.30 (As on 30^th August 2017)