Cotton Arrivals To Be Bigger This Year

Market Intelligence

Cotton Arrivals To Be Bigger This Year

Cotton

During the second half of October, a period characterized by increasing arrival of crop to mandis, saw cotton prices remaining flat to down if compared to the first half of the month. However, fiber prices are still higher than last year for many varieties. As of 28^th October, Bengal Deshi was traded at INR 39,900 per candy (355.6 kg) while Shankar-6 was traded at INR 38,300 per candy. Most other varieties saw spot prices decline INR 100-1,300 a candy during the fortnight.

Average daily arrivals have touched 70,000-80,000 bales in late October from about 25,000 bales at the onset of the marketing season. Total arrivals are estimated at 12 lakh bales in the first month of 2017-18 marketing year as against 14 lakh bales in the same period of 2016-17. The fall in attributed due to advancement of Diwali season this year. Arrivals will be substantially bigger in this season than last year when the markets were adversely affected by the demonetization of larger currency notes by government. The event had helped prices to surge.

Meanwhile, the Gujarat government announced a bonus of INR 500 per quintal (100 kg) on kapas procured by the government agencies from 1^st November. With bonus added the procurement price or the amount paid by the state government works out to INR 4520 - 4820 per quintal, while the prevailing spot rate at mandis in Gujarat is higher in the range of INR 4500-4900 per quintal. In Gujarat, cotton was cultivated over 27 lakh hectares during the 2017 kharif season and it is estimated to harvest around 505 lakh quintals (297 lakh bales of 170 kgs each).

Cotton futures hit more than a year low in the third week of October after USDA’s data showed that exports dropped to a marketing-year low, offsetting gains from higher net sales. Cotton contracts for December settled down at US cents 66.88 per pound. Expert suggested that the weather was very clear in much of the cotton growing areas and the US$ has been on a bit of an uptrend, a negative factor for cotton. However, the fourth week saw some recovery with Futures up 2% for the week its biggest weekly gain since the week of 9 September. December contract settled at US cents 68.2 per pound. Meanwhile, the International Cotton Advisory Committee increased its cotton inventory forecasts for the 2017-18 crop year to 18.89 million ton from 18.7 million ton previously.

In China, long staple cotton was up for sale for the new marketing year, with purchasing prices for grade-137 in Aksu at US$ 3.19 per kg amid insipid trading. In Shandong, the prices for the rest cotton were at US$ 3.23-3.25 per kg. During the second half of October, the China Cotton Index gained RMB 22 to RMB 15,992 per metric ton.

Spot benchmark, Cotlook A index also gained US cent 2.40 during the last fortnight to US cents 80.10 per pound.

Cotton yarn markets were steady in China and transactions were moderate during the last fortnight. Most orders were for short-term use, indicating that producers did not have enough confidence on market sentiment. In Shengze, China, cotton yarn prices for 21s was at US$ 2.92 per kg and while 32s was recorded at US$ 3.52 per kg in, both down 3-4 cents in last fortnight. In India, cotton yarn prices were seen declining after Diwali festival. Prices have dropped around INR 2 per kg during the fortnight. With prices steady in Pakistan and China, Indian spinners were at the advantage of being more competitive on export markets. Demand was rebounding in the domestic market, supported by lower prices. In Ludhiana, 30s combed cotton yarn for knitting were down US cents 4 from the first half of October at US$ 2.96 per kg.