Commodities

Domestic cotton prices likely to remain steady

As the arrival season is gradually coming to an end, the domestic market is entering into a pressure-free zone. Arbind Gupta reports.

Domestic cotton prices will continue to maintain a rangebound trend as pressure on arrivals as well as demand fronts have eased out significantly with total national arrivals touching around 225 lakh bales during the last fortnight. Daily national arrivals were hovering around 30,000 bales.

“Prices will not witness any major fluctuation in the given situation. Except Gujarat and Karnataka, arrivals in most of the states are almost over. On the demand side, most of the good mills along with small units have covered their requirements. No doubt, small units waited till the last minute to cover their cotton requirements,” said a Mumbai-based cotton trader.

However, in the medium to long term, prices will be governed by a combination of issues, starting with the monsoon in the domestic market to the global planting pattern in the coming season and aspects impacting the demand-supply equations in major markets, particularly China.

Meanwhile, the Indian authorities have forecast normal monsoon. However, experts feel that it is too early to make any such statement as in the recent past only some of these predictions have gone awry.

According to the International Cotton Advisory Council (ICAC), the average global cotton prices in the new season are expected to be on the firmer side as the consumption exceeds the production. Already in the current season, the global consumption has increased by 7 per cent at 22.8 million tonnes. “Lower cotton prices during the current season have seen a shift in demand to cotton from competing fibre like polyester. Cotton prices have ruled quite competitive vis a vis other fibres,” said a source.

In the north zone, around 41.70 lakh bales have arrived. Arrivals in the region, are almost over. Prices of Bengal Desi ruled at Rs 1,350-1,450 per maund, while J-34 was priced at Rs 1,500-1,580 per maund.

In the central zone, Maharashtra’s arrivals have touched almost 52 lakh bales, while Gujarat saw arrivals of the order of 47 lakh bales. Arrivals in Madhya Pradesh stood at 16 lakh bales. Arrivals in both Maharashtra and Madhya Pradesh are almost over. In Maharashtra, state federation has procured around 43 lakh bales and sold around 13 lakh bales. On the other hand, the Cotton Corporation of India (CCI) which purchased around 27.33 lakh bales during its MSP operation all over the country, has so far sold over 12.30 lakh bales, of which 2.70 lakh account for export sales.

The Mahrashtra federation recently revised offer prices upward by Rs 300 per candy. According to sources, mills are now looking to the federation for covering their requirements since overall arrivals as well as quality both have come down considerably in the open market.

In Gujarat, Shankar-6 and V-797 were quoting at Rs 16,150-17,000 per candy and 11,200-11,500 per candy, respectively. Spot prices of MECH/H-1 were ruling at Rs 16,000-16,900 per candy in Madhya Pradesh.

In the south zone, arrivals were 32.20 lakh bales, 7.30 lakh bales and 3.50 lakh bales for Andhra Pradesh, Karnatakata and Tamil Nadu, repectively. Cotton lint prices in the region were showing a firm tendency. In Andhra Pradesh, MCU-5 was quoting at Rs 18,500-20,250 per candy.

According to observers, Global cotton prices will continue to show a steady to firm trend with New York futures hovering around 52-57 cents per lb.

Globally, one of the redeeming factors for the current season has been the all time high yield level of 720 kg lint per hectare, which is 75 kg above the previous three levels. In India, after a very long stagnation, the yield has gone up in the two consecutive years. The last season saw average domestic yield moving up to 390 kg per hectare from 310 kg. In the current season, the average yield is estimated to go up to 450 kg per hectare. “Apart from favourable climatic situation and pest-free conditions, improvement in the overall extension system leading to better transfer of information and technology under the Technology Mission on Cotton (TMC), has played a very big role in enhancing the average yield level in the country,” an expert said.

Meanwhile, the US Agriculture Department (USDA) in a special report has said that India is all set to overtake the US in annual cotton production if it continues it endeavour towards improving the average yield. “If the India’s yield continue to improve at the same rate as it has in the past two years, the country’s production could surpass the US as the second largest producer in the world behind China,” said the USDA report.