MUMBAI (Commoditiescontrol): The premium variety cotton prices at major spot markets in the country maintained an upward march while other varieties showed mostly a sideways trend in limited volume trade during the week ended on April 13.
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The weekly average price of the benchmark premium variety (30mm) cotton in Maharashtra rose 1% to trade at Rs 40,900/candy while the Gujarat S6 (30mm) increased 0.6% to Rs 41,750/candy. The difference in prices of Gujarat and Maharashtra were attributed to the quality available in the market.
The availability of the premium variety cotton in Maharashtra was very low and farmers resorted to mixing fardar variety into premium variety in order to compensate for low volume. This led to remaining raw cotton left to arrive in the market having huge quality variation and receiving sub-par rates.
Hence, the previously pressed premium variety cotton maintained an upward trajectory in Maharashtra. The Gujarat cotton of premium variety was more attractive for buyers, MNCs and spinners, shifted their buying interest to Gujarat market.
The premium variety cotton is the highlight of the week as MNCs and spinners continued to show interest for restocking purposes.
MNCs were more eager to procure, mainly the premium variety amid shortage this season due to pink bollworm attack, as they were expecting rise in export enquiries from Chinese market after they imposed 25% import tariff on US cotton amongst the other 105 products imported from US.
With, India being the second importing market of China after US, there is a higher possibility of rise in exports above average levels in the coming months.
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Further, the Indian cotton prices were very lucrative when compared to other international competitors. As per trade sources, the maximum export offer, for Gujarat S6(29mm+) was at 85 cents/lb CIF. It was lower 8.6% compared to Cotlook Index A, which is a basket of cotton CIF offers of major exporting countries, at 93.05 cents/lb.
India has signed contracts to export 200,000 bales of cotton to China in the past one week, the head of a trade body said, after Beijing last week sought to impose tariffs on cotton supplies from the United States.
Hence, exports for this season is revised upwards to 70 lakh bales from prior estimate of 60 lakh bales.
On the supply side, cotton arrivals averaged at 1 lakh bales during the week, maintaining these levels for the third consecutive week. Arrivals were slightly above average daily levels of 0.7-0.8 lakh bales. Farmers were gradually offloading the stocks which was circumscribed during January-February, hence arrivals were higher in comparison to average levels.
Total supply during the current week (April 9-13) marginally higher 4% to an estimated volume of 5.065 lakh bales compared to 4.9 lakh bales in the prior week(April 2-6) and higher 38.8% compared to corresponding week last season at 3.67 lakh bales.
Total new crop arrivals, since Oct 1, have reached 26.82 million bales (83.8% of total estimated production at 32 million bales), up 2.6% from 26.14 million bales arrived during the same period last year.
INDIAN FUTURES MARKET:
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Technical Ideas(March): Expect higher range of 20,837-21,397 to be tested. The peak on C1 chart is at 21111 and got chance to 21,280 in last few weeks. Resistance will be at 21,030-21,280. Further rally can resume on breakout and close above 21280. On sustained rise and close above 21,280 can set a rise to 24,224.
Support will be at 20,780-20,620-20,210. Overall Cotton prices must remain above 19,850 and consolidate to eventually provide the breakout above 21,280.
Hold long position and accumulate at 20,620-20,210 with a stop loss of 19,850. Add further if breakout and close above 21,280 is witnessed.
Conclusion:
Cotton prices has been trading in a tight range of Rs 39,500-43,000/candy since the beginning of the year 2018, with volatility influenced by the trend on the global futures bourse.
The premium variety cotton will maintain an upward trajectory and could crawl to touch the resistance level of Rs 43,000/candy as the season ends, observing the present factors in the market.
From the domestic fundamental point of view, export prospects is positive and price supportive hence this could be the only driving factor for prices to maintain an upward trajectory as domestic spinners were highly unlikely to make sizeable bales procurement until the liquidity issues in the market is resolved from domestic fundamental point of view.
With US cotton market maintaining a sideways trend between 79-85 cents/lb, until some big upmove, the Indian cotton market would trade between Rs 39,500-43,000/candy with bias to mildly upward.
The IMD first monsoon forecast report is scheduled for Monday, which will give insights on the performance of monsoon of next crop year.
(By Commoditiescontrol Bureau; +91-22-40015534)
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