Cotton price goes up on reports of crop damage
After hitting their lowest in nine months, cotton prices recovered, albeit marginally, on reports of crop damage due to deficient rainfall this monsoon in major producing centres and a sudden spurt in demand from textile mills.
The benchmark Shankar 6 variety of cotton reported an increase of nearly 3 per cent in the past two weeks to trade currently at ~10,967 a quintal in the physical market. In futures, however, cotton prices have declined by ~200-300 to trade currently at ~11,040 a quintal (~39,300 for a candy of 356 kg).
Traders believe that the extended rainfall in October has been a bounty for the crop, especially late-sown cotton, across the country. While cotton output in India is estimated to be higher this year, the initial crop damage may not be recovered. Still, the markets will be fully dominated by supplies, resulting in a subdued price trend this year.
“We expect cotton prices to touch ~10,294 a quintal (~17,500 per bale of 170 kg) during the peak arrival season in November-December. Currently, a lower-than-expected crop size in the country, reports of Cotton Corporation of India (CCI) procurement, lower new-season arrivals and improved export demand for Indian cotton are supporting prices. Prices have improved from a low of ~10,590 a quintal (~18,000 a bale) levels in August to currently trade at ~11,058 a quintal (~18,800) levels,” said Ritesh Kumar Sahu, an analyst with Angel Commodities Broking.
The Cotton Advisory Board (CAB), in its meeting held in August, had forecast India’s cotton output would be higher during 2017-18 than the 34.5 million bales reported in 2016-17. Traders and cotton exporters now estimate the cotton crop size at 37.5-38 million bales this year on better use of seeds and farm techniques to report the least pink bollworm attacks on the standing crop.
MCX cotton October futures surged to ~11,529 a quintal (~19,600 a bale) from ~10,812 (~18,380) but corrected steeply to ~11,058 (~18,800) on expectation of good production during the new season, mainly due to the extended monsoon rain in October. Prices have surged due to unexpected rainfall in the key growing regions of Maharashtra and Telangana, which slowed arrival of the new-season crop. Increase in demand by millers has contributed to the bullish trend in both the spot and futures markets. But futures have corrected in the last three trading sessions due to expectations that the cotton crop in Maharashtra will benefit from the October rain, which will enhance production of the late-sown crop. In Maharashtra, monsoon rainfall in cotton-growing areas was deficient during four months of the monsoon.
On the other hand, there are good carryover stocks from the previous season. The country imported about 1.85 million bales of cotton (170 kg per bale) during 2016-17 till June, up 130 per cent from the previous year’s imports, according to data released by the department of commerce.