Good Demand, Delayed Crop, Firm ICE Futures Spiked Up Indian Cotton Prices

Market Intelligence

Good Demand, Delayed Crop, Firm ICE Futures Spiked Up Indian Cotton Prices

In the last few days, the market witnessed good price movement in Indian cotton followed by firm ICE futures. Good demand has been reported from local mills and exporters. Most of the local mills are shifting from old crop cotton consumption to new crop cotton consumption in view of better realisation despite new cotton being pricier. Quality issues continue both in old crop (last picked cotton) as well as new crop (first picking and rain damage). Good yarn movement has been reported. CCI's aggressive MSP buying activities in northern India have supported cotton prices in the open market. Moreover, the agency's buying activities has given confidence to farmers across India. CCI continues offering 2019-20 crop, with daily price increases ranging between Rs 100-300 per candy, depending on market situation. Cotcorp is able to sell some quantity on everyday basis. Firm upward movement in ICE since the last week has made the Indian market active too, and good cotton buying selling activities are reported on a daily basis. But ginners/traders are missing from the market - they are not offering new crop for forward months. Most of the trade is happening for nearby deliveries only in order to mitigate the uncertain price risk. Current market is trading at Rs 38000-38500 per candy (highest prices of the season till now) for new crop S-6 with condition of 10% moisture and 29mm/75 RD value and ready delivery. Parallel to this, 29 mm/74RD 2019-20 crop is trading around Rs 37000 per candy level. Recently, the market has ignored cotton fundamentals and is trading on sentimental basis. Huge ending stock, good crop projections, steady consumption could not hold prices down. Higher MSP and commitments from CCI were enough to make the cotton market bullish within a very short time. In addition to that, untimely rain and adverse weather forecasts also added some sentiments to support the cotton prices for new crop. Secondary sources are reporting all India daily arrival has reached 75000-90000 bales (approximately 70% new and 30% old crop). This is expected to continue, with daily increase in numbers in the coming weeks as the weather clears. Further, CCI's buying activities and export demand will decide the prices of cotton in the open market. Heavy rains have been reported across many parts of Telangana, particularly in northern parts and Karnataka. Meanwhile IMD has issued warning for heavy to very heavy rains over western coastal parts in Maharashtra, Madhya Maharashtra and parts of Marathwada (Aurangabad, Jalna, Parbhani, Beed, Hingoli and Nanded) from October 15 onwards. These districts in Marathwada region of Maharashtra are important cotton growing areas. MCX Cotton MCX is still struggling forvolume based trade. Very small volume is getting traded and cotton futures briefly jumped to over Rs 19,000 per bale on October 13 as participants widened their positions, as seen from the open interest. Cotton had gained for the fourth successive day on Monday and rose 2% on the MCX Index to settle at Rs 18,940 per bale (170 kg). CAI revised its estimates for 2019-20 Cotton Association of India (CAI) has increased the estimate for cotton output by 0.55 million bales to 36 million bales for the 2019-20 season in its September estimate due to higher production in the central zone. CAI in its earlier estimate had pegged the production at 35.45 million bales for the 2019-20 season. The production estimate for the central zone has been increased by 0.55 million bales that is 0.25 million bales each in Gujarat and Maharashtra and 50,000 bales each in Madhya Pradesh. The total cotton supply till the end of the season, that is up to September 30, was at 40.75 million bales, which consists of the opening stock of 3.2 million bales at the beginning of the cotton season on October 1, 2020, crop for the season is estimated at 36 million bales and imports are estimated at 1.55 lakh bales. Imports are estimated to be lower by 1.65 million bales compared to the previous year's estimate of 3.20 million bales. Domestic consumption for the entire crop year, that is up to September 30, has been estimated at 25.0 million bales. The CAI has retained its export estimate for the season at the same level as estimated by it previously, that is 5 million bales. The carryover stock estimated at the end of the season is 10.75 million bales. Kasturi- A new brand of Indian cotton "Kasturi" Brand Long Staple Cotton has these basic features:

Staple Length 30+mm
Micronaire 3.8-4.2
RD Value 78+
Strength 29G/Tex or more
Uniformity Index 85%
Trash less than 1.7%
Moisture content 8% or below.

Union Minister of Textiles and Women & Child Development launched the first ever brand and logo for Indian cotton on the second World Cotton Day through video conferencing. WASDE October Report The 2020/21 US cotton supply and demand estimates show marginally lower production compared with last month. Production is lowered less than 1%, to 17 million bales. Domestic mill use, exports, and ending stocks are unchanged. At 7.2 million bales, US ending stocks in 2020/21 are projected at 42% of use, compared with 41% in 2019/20. The 2020/21 season-average price for upland cotton is forecast at 61 cents per pound, 2 cents higher than last month and slightly above the final 2019/20 price of 59.6 cents. The 2020/21 world cotton supply and demand forecasts feature lower production, higher consumption and trade, and lower ending stocks compared with last month. Production is lowered more than 900,000 bales with declines in Mali, Pakistan, and Greece offsetting a larger expected crop in Nigeria. Consumption is 1.5 million bales higher, largely reflecting revisions for China and India. World trade is projected about 500,000 bales higher this month, reflecting a 500,000-bale increase in China's projected imports, and on the export side, higher exports by Brazil and Uzbekistan offsetting a decline for Mali. World ending stocks in 2020/21 are now projected 2.7 million bales lower than in September, at 101.1 million bales, equivalent to 89%of consumption. For India WASDE made very slight changes, increased domestic use and reduced ending stocks. US cotton export sales week ending October 1, 2020 Net sales of 178,400 RB for 2020/2021 were down 24% from the previous week and 27% from the prior 4-week average. Increases primarily for Vietnam (125,500 RB, including 1,300 RB switched from Hong Kong and decreases of 9,200 RB), China (26,700 RB, including decreases of 700 RB), Pakistan (21,500 RB, including decreases of 1,600 RB), Costa Rica (6,200 RB), and Mexico (5,200 RB, including decreases of 200 RB), were offset by reductions primarily for Bangladesh (14,000 RB), Japan (3,900 RB), and Hong Kong (1,300 RB). For 2021/2022, net sales of 15,000 RB were for Bangladesh (13,200 RB) and Costa Rica (1,800 RB). Exports of 142,300 RB were down 35% from the previous week and 38% from the prior 4-week average. Exports were primarily to China (53,500 RB), Vietnam (16,900 RB), Mexico (16,800 RB), Turkey (11,200 RB), and Bangladesh (9,200 RB). (Vimal Verma is a cotton trader)