· Price Movement Summary: MarketRecap and prospectso MCX Cotton May Contract expired with the close price of INR 16490 per bale. There was no trade on Friday over May Day. In the reference week cotton continue to trade in a range bound manner for the 6th consecutive week post corona fallout. o Coming week will be crucial as there can be some respite from the government in terms of opening the market. However, corona cases continue to rise and has been as of now been rising in linear manner. Analysts are saying that the total cases might reach near to 1 lakh before the daily number of cases becomes insignificant. Thus, over all finger remained crossed on future development in the market and trade in futures as well as spot. o Meanwhile centre has announced extension of lockdown period for another two-week i.e till 17th of May. In this period depending on which category the district falls in terms of sensitivity towards corona cases there are provisions of opening businesses and transports. Thus, as the govt tries to reopen the nations in phase wise manner might see some improving sentiments. o ICE cotton futures weekly price movement remained almost unchanged with the price rising on improving prospects of exports in China which later faded away due to the possibility of another trade war between US and China. o The positive sentiments was lingering in the market on rumours of cotton purchases for the last two weeks and this is why the market rose several cents. · Market News: o Sowing in South Malwa districts, the cotton belt of Punjab state, started this week, with a delay of seven days and it is expected to peak from the next week. Wheat crop has been bumper and is at the last leg of harvesting. The delay has been due to delayed harvest of wheat, shortage of labour for harvest amid covid lockdown. o State agriculture department has said that Cotton has been sown in about 500 hectares and the estimated area of 1.25 lakh will be covered by May 20. o The state agriculture department had upward revised the cotton acreages target from 5 lakh hectare to 5.5 lakh hectare in the state. o In Bathinda, the cotton area will be stepped up from 1.40 lakh hectare in 2019 to 2 lakh hectare, In Fazilka, 92,000 hectare to 1.25 lakh hectare this year, in Muktsar from 72,000 hectare to 1.05 lakh hectare.o As the government has allowed resuming all rural and agricultural activities and thus in other states especially in South where farmers use their own labour for the cultural operations might not be such problem. o The MHA announced its decision to extend the nationwide lockdown further by two more weeks to prevent the spread of Covid-19. Thus it will pave the way for slow opening up of trade and supply chain of cotton in coming weeks. Though the disruptions has already ate away much of the cotton demand. Further the lingering of such lockdown and crisis related to labour and interstate transport of passengers will continue to have long term ramification in cotton as well as commodity on whole. o To what extent the consumption will fall, time will only tell as uncertainties remained on the lockdown extensions. o Traders are optimistic but the spinning yarn, textile companies and garment industries will continue to face the problem of labour as well as shipments and in such case there are more chances that no body will be willing to stockpile there produce. o Exports of cotton, yarn, fabric as well as garments is expected to remain restricted over global slowdown and lesser scope of consumer expenditure. o World bank has said that the Indian economy in 2020-21 may fall to 1.6% to 2.8% as the corona fall out has impacted in all industries. o With the purchase of one lakh quintal raw cotton from south Malwa districts after it resumed operations two weeks ago, the Cotton Corporation of India (CCI) has bought about 41% of the total cotton produced in 2019.o According to official data, about 44,000 quintal cotton has been procured from Fazilka and 41,000 quintal from Mansa district since April 14.o The CCI is working capacity is down to 20 percent of what it used to be due to the lockdown. At the rate with which they are going they will take another three months to conclude procuring. International Market Update:o In Pakistan, According to the monthly updated economic report issued by ministry of finance for the month of April 2020 during the current year according to estimates cotton production has declined by a 94 lac bales because of the bad weather conditions and the attack of insects on the cotton crop. o In US Cotton planting is picking up in most areas and planting progress is slightly ahead of average and ahead of last year. o According to USDA NASS, prospective acres of cotton in Alabama are down 2% at 530,000 acres. This is likely due to the drastic drop in cotton prices.o In their April report, the U.S. Department of Agriculture (USDA) reduced world mill use for cotton for the 2019-2020 crop year by 7.6 million bales, as compared to the March estimates. At 110.6 million bales, this would be one of the largest annual declines on record with lower consumption estimates for every major country. o May WASDE report is due this month and it will be interesting to see how the balance sheet of 2020-21 looks like in USDA projections. o The weekly export sales data showed net sales of 434,800 running bales (RB) for 2019/20, up noticeably from the previous week, while exports of 253,700 RB were down 5% for the week ended April 23.o The report showed sales to China of 422,400 RB for 2019/20 and 115,300 RB for 2020/21. Traders were expecting those sales following news that the country was planning to buy for its strategic reserves.· Weather Analysiso Winds from Bay of Bengal continue to penetrate in northern plains and has increased the moisture level in the air resulting in scattered rains in most of parts of the northern and central India. o The pre monsoon season has been above normal rainfall of 26 per cent, ensuring satisfactory storage conditions across the country and adequate supply of irrigated water for farmers.o In the coming week isolated rains in expected to continue in most parts of India including northern cotton growing belt. o Market will be waiting for the release of estimate of monsoon rains and it expected to remain normal as per its previous official statements. · Supply and Demand Analysis: o According to Telangana 3rd Advanced estimates, Cotton output in Telangana, has increased by 65% year on year to 6.9 mln bales in 2019-20. Yield has increased to 548 kg per ha from 384 kg the previous year, the state farm department's third advance estimates showed. o In the upcoming WASDE report USDA will releases its first estimate for 2020-21 cotton season of India. We are expecting the acreages should be at the same as of 2019-20 whereas yield to be kept at average. · Price Outlook: Overall India's domestic price will take cues from the price direction of ICE futures and how CCI procures balance cotton crop and subsequently how it disposes of its huge stock which is likely to be more than one crore bales after it's procurement is complete for the season. On the demand side, we may see a huge slowdown in demand for raw cotton as spinning mills and fabric mills are likely to operate in substantially lower capacity for the next several weeks after resumption of operation. This is due to two factors shortage of labor and lack of demand for yarn and fabric further due to sudden lockdown there is a huge inventory of yarn and fabric with trade. Given this scenario ample supply and subdued demand along with liquidity crunch in the market, wemay see new lows in raw cotton prices.
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