Domestic cotton prices maintain position on global support

Though the recent northward movement in global cotton prices is yet to directly impact the domestic prices, it has certainly offered the much-needed sentimental support. Reports Arbind Gupta.

Domestic cotton prices maintained a steady trend during the last fortnightly, even as global prices firmed up to a certain extent as international funds took long positions after adopting wait and watch stand. According to observers, the current domestic prices may not get impacted in the short term. However, if the global trend continues for a longer period, it may found reflection in local prices. “I feel the cotton prices have bottomed out and the steady trend will be maintained for next few weeks or so since no major changes are expected on the demand-supply front,” said Mr B G Jain, director (textiles), Forbes Gokak.

Some weakness was observed in prices in northern varieties like J-34 following slowdown in mill offtake in the region.

At present, local prices are finding some support as mill consumption is on the higher side. But the arrivals have exerted considerable pressure. National arrivals have peaked up at 1.50 lakh bales (daily) and this may continue for another couple of weeks. From mid of February, the arrivals are likely to tapper down and this is expected to offer good support to prices. So far (as on January 25), around 130 lakh bales arrived in markets. Movement of local prices will also depend upon as to how the Maharashtra cotton federation maintains its position in future. The federation after halting procurement for a very short period, has once again started the operation. Meanwhile, the Cotton Corporation of India (CCI) has also started its MSP operation in the state from January 8, 2005. The corporation has purchased around 35,000-40,000 bales in the last three weeks of its operation.

Meanwhile, improving polyester fibre prices are also going to offer the much required support to the cotton prices. Moreover, demand is expected to find some boost-up following some switchover from polyester to cotton. Prices of other manmade fibres like viscose and acrylic were found stable movement.

ICAC in its latest report has projected India’s cotton consumption during the current season at 3.10 million tonnes as against 2.90 million tonnes in the previous season. China’s cotton consumption for the season is estimated to touch 8 million tonnes as compared to 7 million tonnes.

According to ICAC, declining prices in the current season will affect the global cotton production which will decline by 10 per cent to 22.4 million tonnes in the coming season. However, global mill consumption is projected to move up to 22.9 million tonnes, up 400,000 tonnes from the current level. This tightening in supply will ensure higher prices in the 2005-06 season. For this reason, ICAC is of the view that the average Cotlook Index will rebound to 59 USC per pound in the coming season, 23 per cent higher than the current season.