MUMBAI(Commoditiescontrol): The spot prices continued to move higher for the second consecutive week, tracking bullish cues from US bourse.
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Spot prices were volatile as it rose 4 out of the 5 trading sessions on tight selling while demand side was more or less limited with major enquiries diverted towards the premium variety cotton.
The weekly average of the benchmark premium variety cotton in Maharashtra was higher 1.5% to trade at Rs 41,330/candy while the Gujarat S6(30mm) was higher 2.2% to Rs 42,540/candy. Other variety cotton increased marginally on a weekly basis. The difference in prices of Gujarat and Maharashtra were derived as per quality available in the market.
Both spinners and MNCs were eager to procure premium variety cotton which was in short supply this season after pink bollworm attacked bumper crop in Maharashtra and Telangana during the boll maturity period. Hence, the country faces quality variation and degradation this season and production may likely range 321-345 lakh bales(170kg) each.
MNCs, who deal in exports, were eagerly to cover their future needs or to restock gradually depleting inventories as the prevailing premium variety cotton prices ranged between Rs 41,000-42,500/candy. Further, weakening USD/INR which is hovering around the three month low levels at 65.10 has raised export competitiveness in the global market.
The benchmark Gujarat S6(30mm) price, in terms of US cents/lb, last traded at an average of Rs 42,600/candy or 83.49 cents/lb(ex gin) and was lower nearly 9.5% compared to Cotlook Index A at 92.2 cents/lb. While, it was lower nearly 2% compared to US cotton futures last traded price at 85.12 cents/lb.
Weakening USD/INR has raised hopes of better enquiries of Indian cotton during the month of March as export pace until January was lagging this season. Shipments during the month of January lagged 11.4%, year on year basis, to 12.40 lakh bales compared to last year at 14.30 lakh bales. Total bales exported as of January is estimated at 33.50 lakh bales, lower 7% from same period last year 36.01 lakh bales. (Full Report)
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Cotton crop supply during the week observed minor improvement and maintained the daily levels of 1.3 lakh bales.
Total supply during the holiday shortened week (March 5-9) rose 38% to an estimated volume of 6.62 lakh bales compared to 4.81 lakh bales in the prior holiday shortened week(Feb 26-March 1) but was lower 21.6% compared to corresponding week last season at 8.44 lakh bales. Demonetization delayed supply progress as farmers withheld stocks and offloaded during the first quarter of 2017.
Total supply in the current season, as of March 9, reached 22.10 million bales(170kg) which is higher 4.5% compared to corresponding period last season at 21.15 million bales.
Conclusion:
The global market has now gone into a bull gear with the US cotton prices trending near 10 month highs during the week.
The Indian market is not trading under the fundamentals but is rather more influenced by the trend on the US cotton futures bourse.
Supply is maintaining the average levels of 1.3-1.4 lakh bales required to reach the estimated production target set between 321-345 lakh bales.
Indian prices have found a good support at Rs 40,000/candy hence until price breach those levels, downtrend is out of the picture, but upside potential is quite good with the near term resistance at Rs 43,000/candy and key resistance at Rs 45,000/candy.
(By Commoditiescontrol Bureau; +91-22-40015534)
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