Login ID:
Password:
Partner Login
Contact Us : 7066511911

Indian Cotton Market Intellience and Price Outlook

18 May 2020 9:25 am
 Comments 0 Comments  |  Comments Post Comment  |  Font Size A A A 

FUNDAMENTAL ANALYSIS REPORT

Driving factors Market Sentiments
Better prospects of US Crop Bearish
WASDE report Bearish
Positive weather for cotton in coming weeks Bearish
Better opportunity for India to export cotton Bullish
Stimulus for industries in major economies to boost trade sentiments Bullish
Expected market and industries opening under new corona regime Bullish

Price Movement Summary: Market Recap and prospects
MCX Cotton May Contract traded sideways over bearish WASDE report which was in line with expectations; continue to linger over demand destruction of cotton and better prospects of new crop. Spots market in Punjab, Gujarat and Haryana are opening, with price discovery taking place at these mandis. The fourth lockdown has begun and we may see stage wise opening of the market across India. ICE Cotton July Contract moved up in expectation of rise in market demand of cotton. With reopening of the market, the fibre was seen shedding the bearish WASDE report which was in line of market expectations. ICE new crop contract, however, traded sideways. In the coming week, prices action is going to be underpinned by USDA’s New Crop progress report which is going to be released on 18th of May (Monday) and the US exports sales report due this Thursday. Open Interest and Volume declined in this week, whereas MCX cotton edged up indicating short covering and a bearish market.
Date 08-May-2020 15-May-2020 Change
MCX Cotton (May) 15690 15830 +140
ICE Cotton (July) 56.27 58.25 +1.98

Market News:
Agriculture experts in Telangana has suggested that cotton can be grown in 65 Lakh to 70 lakh acres in the state and preference should be given for cultivation of cotton due to better prospects for farmers, earning over paddy. Telangana wants to regulate the crop acreages and thus is discussing with the experts with the most suitable crop mix acreages for the state. According to Punjab State Agricultural Marketing Board, cotton arrivals has increased by 26% and is at 43.25 Lakh quintals as compared to 34.68 lakh quintals recorded during the 2018-19 season. CCI purchased 16.74 lakh quintals at MSP of Rs 5,450 per quintal, whereas the private buyers bought 26.50 lakh quintals from farmers in the cotton-growing south Malwa belt. The average per acre yield reached close to 800 kg lint per hectare which was one of the best average yield recorded in the state. The arrivals is expected to increase to 44 lakh quintals. Telangana has requested the Centre, as a short term measure, support of up to 50 per cent of wages of the workers in the sector, contingent on continued employment of workforce for 6 months as a long repayable in the long run. The state has also urged center to consider 50 per cent yarn subsidy across the handloom industry. Further, the GST Council should also consider complete waiver of GST on handloom products for a period of 2 years to boost the sector. As the Monsoon in Maharashtra state is picks pace and Govt. wants to ensure adequate seed availability on time. Andhra Pradesh state government has set the target of cotton acreages at 5.44 Lakh hectares as against 6.54 lakh hectares last year. The lower acreages is due to fall in prices at the time of arrivals commencing in state due to corona aftermath. CCI in a public notice has announced bulk discount for cotton bales from 2018-2019 and 2019-2020 cotton seasons to sell the procured cotton. The discounts have been undertaken in order to dispose-off old stocks to make space for new season procurement that will start 4-5 months later. Further this might boost spinners to buy cheap cotton and spin it for some better price realization when demand gets boosted.
Corona Update:
Finance Minister announced amendment in the Essential Commodities Act to enable better price realization for farmers. This will deregulate the supply and demand of cereals, pulses, onions, potatoes which used to be periodically brought under control from the government. Policies of cotton exports curbs might also be under government radar. However such situation might be problematic to cotton spinners. Cotton industry witnesses hardship at the cost of Farmer’s income during a time when the yarn prices are low and cotton prices are high. Definition of MSME has been revised and thus the investment limit has been revised upwards and an additional criterion of turnover introduced. So now, a micro firm is one with investment up to Rs 1 crore and turnover less than Rs 5 crore, small firm has investment up to Rs 10 crore and turnover up to Rs 50 crore and medium firm will be one with an investment of up to Rs 20 crore and turnover under Rs 100 crore. This is going to help ginning and spinning industry as they can now register under MSME and get the benefits. Textile and apparel sector is also is expected to get benefitted from such move. The daily corona cases continue to remain above 3500 and there is no slowing down in terms of daily number of cases. Analysts are saying that the point of inflection in terms of daily number of cases is still far and it might reach up to 7 to 9 thousand cases per day and it may take mid-July to achieve so. Analysts are also projecting the total number of cases to reach up to 7 lakh before the daily number of cases becomes insignificant. According to The Centre for Disease Dynamics, Economics & Policy (CDDEP) a peak of one million hospitalisations would be encountered in early June. Thus under such situation lockdown 4.0 has been imposed and will start from 18th May. However states are opening up industries and complete shutdown is expected to be inky in containment areas. But as the laborers leave for their respective hometowns in special trains, there is lack of orders up the value chain. There might be limited operations, even if the ginners/spinners and textile manufacturing starts production.
International Market Update:
In US, 32 percent of the cotton acreage was planted by May 10, eight percent points ahead of last year and 5 point ahead of the 5-year average. Progress was furthest advanced in Arizona at 85 percent planted, 14 percentage points ahead of last year and 3 points ahead of average. US upland cotton sales dipped 36% in the week ending 7th May and was at 238,084 RBs. US also shipped 241 730 RBs. Accumulated exports for the season has been recorded at 10.557 million bales. Net sales for new crop recoded in the week has been at 93 280 bales.

Weather Analysis
Easterlies winds continue to draw moisture from Bay of Bengal and has kept the temperature down. April average temperature was at record lows and similar situation seems to be prevalent in India. Southern peninsula is witnessing intermittent showers. However, it requires bountiful rain for any early start of sowing in southern India. West though has been mostly dry. Low pressure area has formed in the Bay of Bengal and its trajectory now is forecasted to move towards north northwestward to hit Orissa and to move further northward to Bihar and West Bengal. We might see some rainfall activity in coastal Andhra Pradesh but still the impact of this cyclone is going to be negligible in cotton growing belts. Monsoon is expected to arrive in Andaman and Nicobar Island before time due to the cyclone but it is forecasted to reach Kerala coast later and is forecasted to arrive on 5th June, 4 days later than the usual date of arrival. IMD recently adjusted the date of arrivals of Monsoon in India. In US, there is forecast of rains in the South-Central US in the early half of week which is expected to keep the planting progress higher in coming week. Planting progress is already ahead of last year and 5 year average. The Soil Moisture conditions in key growing areas of Texas (which forms 38% of area) is abnormally dry, other cotton growing states soil moisture level is wet to abnormally moist.

Supply and Demand Analysis
:
The U.S. cotton forecasts for 2020/21 include larger beginning stocks, consumption, exports, and ending stocks compared with the year before. Production is forecast at 19.5 million bales—400,000 bales less than the year before, based on 13.7 million planted acres as indicated in the NASS March Prospective Plantings report. Planted area is expected to be virtually unchanged from 2019/20, but harvested area is projected 2 percent lower, as abandonment rises from 2019/20.The yield is projected only slightly higher, using 10-year regional averages. Domestic mill use and exports are expected to rebound as the world economy begins to recover. Mill use is expected to rise 200,000 bales, and exports by 1 million; but ending stocks are expected to rise 600,000 bales to 7.7 million, equivalent to 41 percent of use. This would be marginally higher than in 2019/20 and the highest since 2007-08’s 55 percent. The price received by upland producers is forecast at 57 cents per pound, slightly below 2019/20. For 2019/20, U.S. cotton production is raised slightly from last month. The export forecast is unchanged, but expected consumption is 200,000 bales lower, and ending stocks 400,000 bales higher.World ending stocks in 2020/21 are projected to rise for a second consecutive year, but at a much slower pace.


With harvested area down globally, production is expected to decline 3.7 million bales, while consumption is expected to rise 11.5 million bales as the global economy begins recovering. Global ending stocks are expected to rise 2.3 million bales, but fall as a share of consumption, from 93 percent in 2019/20 to 85 percent.For 2019/20, the world consumption forecast is reduced to 105 million bales, down 5.6 million from the previous forecast and 12.7 percent below the previous year. This would be the largest annual decline in world consumption since the 19th century. World production is raised 1 million bales from the previous month, and 2019/20 ending stocks are 5.9 million higher. The revised year-to-year increase in global ending stocks is 16.9 million bales.

Price Outlook:
Market is expected to continue to trade sideways in the wake of near normal monsoon and market will look for new crop development in US and India amidst key economic indicator such as employment and GDP growth to assess the resumption in consumption of cotton based goods. For the time being things remain gloomy.


       
  Rate this story 1 out of 52 out of 53 out of 54 out of 55 out of 5 Rated
0.0

   Post comment
Comment :

Note : This forum is moderated. We reserve the right to not publish and/or edit the comment on the site, if the comment is offensive, contains inappropriate data or violates our editorial policy.
Name :  
Email :  
   

Top | Post Comment  

Latest Special Reports
Weekly: ICE Cotton Seen Moving Northwards Amid Lower Cr...
Weekly: ICE Cotton Range Bound; Eyes on Technical Break...
Weekly: ICE Cotton Rises 3% on Export Sales, U.S. Crop ...
Weekly: ICE Cotton Drops Over 3% On Demand Concerns; Do...
more
Top 5 News
USD/INR (Jul 20) Counter-trend Bounce / Key Resistan...
USD/INR (Jul 20) Counter-trend Bounce / Key Resistan...
USD/INR (Jul 20) Weak Price Trend / More Downside Pr...
USD/INR (Jul 20) Bearish Breakout from a Descending ...
CBoT Soybean Reaches 4-Months High on Dry, Hot U.S. Wea...
Top 5 Market Commentary
Booster Dose For Indian Textile Sector
Coriander Prices Weaken amid Dull Demand, Higher Produc...
Cotton Prices Steady-to-Weak in South Indian Markets
Burma Urad SQ Variety Drops At Chennai; FAQ Variety In ...
Cotton Prices Firm in Gujarat amid Improved Demand
Copyright © CC Commodity Info Services LLP. All rights reserved.