MUMBAI (Commoditiescontrol) - As predicted in the last week’s report (25th July, 2015), prices of cotton in domestic markets stayed stressed during the week ending 1st August, 2015. In north India, cotton prices (J-34) ended the week in the range of Rs 3,680-3,715/maund (37.3kg each) and S-6 cotton in Gujarat corrected upto Rs 33,500-34,300/candy (356kg each). Though, prices were quoted as per quality variations.
Key Factors Checking Price Rise:
Prolonged Supportive Weather
Continuous favorable weather conditions for cotton crop over the major growing areas in the country is posing a serious threat to prices. Good weather conditions may lead to better crop despite reduced acreage in few portions, putting cotton prices under stress. Amid good monsoon rains, sowing of cotton was completed early, indicating early arrival of the next crop. Many market experts are of the opinion that cotton is in for a bearish drive in the near-term citing good crop, insignificant domestic demand, and slow export demand from the United States and China.
CCI E-Auction Restricts Buying
The Cotton Corporation of India (CCI) releasing its cotton on a regular basis kept pressuring cotton prices on various spot markets. The agency continuously lowered its floor prices to attract higher sales. Floor prices were reduced by Rs 500-600/candy. It is releasing atleast 80,000-90,000 bales of cotton daily. Throughout the week, it liquidated 1,84,300 bales from 4,56,400 bales offered from its stock. In the backdrop of CCI’s sales, textile mills and spinners mostly stayed away from buying spot cotton. So far in the current season, CCI has sold around 38.25 lakh bales and now has an unsold stock of around 48.65 lakh bales as on 31st July, 2015.
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Global Market Turmoil
Yet another major factor dampening sentiments is the ongoing global uncertainties fueled mainly by China’s, world’s second largest economy, gloomy economic scenario and liquidity crisis. China’s latest stock market upset has added to wider concerns about the state of the Chinese economy. The country witnessed worst monthly drop in six years, with Shanghai composite index lost 10 percent this week alone and was down more than 14 percent for the whole of July. Also, growth in China's vast manufacturing sector stalled in July, missing market expectations for slight growth, an official survey showed on Saturday. The official Purchasing Managers' Index (PMI) stood at 50 in July, down from the previous month's 50.2. The 50-point mark separates growth from contraction on a monthly basis.
That Apart, good crop condition in the United States is enhancing chances of a better crop next year. This is further supported by the U.S. Department of Agriculture (USDA) staying firm on its rating of U.S crop of 57 percent good/excellent for the three consequent weeks. On-call data also shows a sideways tone. Speculators cut net long position by 2,502 contracts to 40,502 in week to July 28, CFTC data showed.
Therefore, export demand from the these two major consumers is unlikely to get a boost in the near-term.
Depressing Movement In Yarn
Extended sluggish movement in domestic yarn market is something the country is witnessing from a long time. Both, domestic and export demand in yarn is negligible, which is leading to piling up of stock with textile mills. Mills are sitting with large inventory of yarn and demand in grey market is gloom at the moment. Prices of yarn corrected further Rs 1-2/kg in Coimbatore, while they traded mostly steady elsewhere. Meanwhile, a south-based mill kept hosiery yarn prices unchanged for this month, as per market sources.
Slow Offtake Of Chinese Cotton
Though reserve cotton stock sale China, is recording bearish response, underlying sentiment is still negative.At 31st July sale, the country sold 697.04 tons of cotton is reported out of 51701.33 tons, a sale of 1.35 percent. Yesterday’s auction was quoted between a high of CNY 14,250/ton and a low of 13,060 yuan. Till 31st July, 2015, China has sold around 39,002 tons cotton, around 5 percent from the target of 1 million tons from the state reserves. It is Any fresh improvement in export demand from the world’s top consumer is very unlikely in the near-term.
But, Further Fall In Prices Is Unlikely
We at commoditiescontrol expect fall in prices to halt at the current level, as they are already hovering at bottom level, with prices showing steady trend in the next week. Also, prices may recover from this level in the sessions to come owing to fresh bout of positive signals:
Decreased Sowing Figures
According to the Union Ministry of Agriculture, cotton has been planted in around 101.91 lakh hectares till 30th July, 2015, slightly below 104.84 lakh hectares during the corresponding period last year. Sowing has completed in the northern cotton belts, while it is progressing well in the central and southern portions. Until last week, sowing of the crop was continuously on the rise.
Below is the state-wise cotton sowing data as on 30th July, 2015:
Domestic Consumption To Rise - CAI Estimates
The Cotton Association of India (CAI) in its June estimate retained its cotton crop estimate for the season 2014-15 beginning 1st October 2014 at 382.75 lakh bales (170kg each). The projected Balance Sheet drawn by the CAI for the year 2014-15 estimates total cotton supply at 453.65 lakh bales, while domestic consumption is estimated at 315.00 lakh bales, thus leaving an available surplus of 138.65 lakh bales. On arrivals, it said that total cotton arrivals as on 30th July, 2015 is estimated at around 376.25 lakh bales.
Weekly Weather Roundup - IMD
India Receives 21% Above Normal Rainfall
Southwest monsoon during the week was 21 percent above normal over most of the country, 68 percent in central India, while it was 33 percent over northwest. During the week, rain deficit was seen at 50 percent in south Peninsula and 22 percent over east and northeastern India.
For the country as a whole, cumulative rainfall during this year’s monsoon has been 4 percent below the long period average (LPA) as on 30th July, 2015. While, cumulative rainfall during 1-29 July has been 15 percent below LPA.
South Peninsula faced rain deficit of 46 percent. Major rain deficient states were Telangana, Rayalseema, Karnataka, Kerala, Marathwada in Maharashtra, east Madhya Pradesh, Uttar Pradesh and Punjab.
Between 1 June-29 July, 2015, rain deficit of 25 percent was noted for Konkana & Goa, 54 percent for Marathwada, 25 percent for Madhya Maharashtra, 45 percent for north interior Karnataka and 34 percent for Rayalseema.
Forecast For Next Week
Rainfall activity is likely to be normal to above normal over central and northwest India till 9th August, and over Northeast and adjoining east India between 5-14 August.
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Cotton Price Settlement On Multi Commodity Exchange (MCX) As On 31st July
Cotton final settlement prices of MCX contracts which expired 31st July, 2015 stood at Rs 16,170/bale. Meanwhile, prices of kapas khali (CoC) prices settled at Rs 1,948.5/100kg.
Stock Position At Exchange Warehouses
Cotton stocks at Multi Commodity Exchanges (MCX) accredited warehouses reduced 4,200 bales to 39,900 bales as on 30th July, 2015 from 39,900 bales on 25th July, 2015.
SPECIAL COVERAGE THROUGH THE WEEK
Whiteflies Outbreak Spreading In Haryana, Cotton Yield May Fall
Outbreak of whiteflies on cotton crop are spreading in Haryan as several crops reported to be under attack in Hisar districts after Rohtak. Cotton crop are likely to suffer damages due to pest related problems. Agriculture experts believe that if condition persists a while it will affect crop severely which may result in low yield.
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Kharif Crops Prospect Mostly Good So Far - IMD
The Indian Meteorological Department (IMD) said that prospects of summer crops like rice, pulses and oilseeds are good so far in most of the country, but the situation is not good in some interior parts of Maharashtra, Andhra Pradesh, Telangana and Karnataka. More than 50 percent of the sowing of summer crops has been completed so far in this kharif season and farmers have taken up pulses, oilseeds and coarse cereals in a big way, as per the latest data of the Union Agriculture Ministry.
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CAI Calls For Fast Disposal Of CCI Cotton Stock
The Cotton Association of India (CAI) has expressed concern over remaining stock of cotton with the Cotton Corporation of India (CCI). It had procured about 87 lakh bales of cotton from farmers at minimum support price (MSP) to provide price support. Unfortunately, CCI has not been able to sell the entire quantity of cotton procured by it. It has so far liquidated around 38-39 lakh bales cotton and currently has an unsold stock of around 48 lakh bales. (Click Here For Full Story)
U.S. Cotton Crop Condition Stays 57% Good/Excellent - USDA
The U.S. Department of Agriculture (USDA) in its weekly crop progress report for the week ending 26 July, 2015 stated that U.S. Cotton crop condition remained 57 percent good/excellent. According to the USDA report, 85 percent of U.S. cotton crop reached squaring stage in all the 15 major cotton growing states during the week compared to 87 percent a year ago period, and below five year average of 88 percent. Cotton setting bolls totaled 44 percent, below 47 percent of the corresponding period last year, and slightly behind the five year average of 49 percent.
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Demand For High Quality Cotton Pushes Prices Up In Brazil
In the Brazilian market, low availability of cotton and demand for batches of high quality are pushing prices up. Processors are more active, buying small batches - from 200 tons below - and traders are also demanding cotton. Despite various types of cotton on spot markets from the 2014-15 season and the previous one, which pressured quotes in some moments, the urgency is leading processors to increase prices paid.
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Weekly Technical Update
MCX Cotton Bales Weekly: Exit Long On The Rise (Price are in INR (Rs)/Bales)
Exit long on rise to 16110-16250-16560. Expect lower range of 15940-15630 to be tested. Sideways volatility and oscillation around the DRV of 16154 can happen. Band of movement is 17140 to 15520. Momentary bias would be to test lower range. Objective remains to exit long position on the rise.
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NCDEX Kapas April’16 Weekly: Expect Lower Range To Be Tested (Price are in INR (Rs)/20 Kg)
Exit long and sell rise to 851.5-879 with a stop loss of 895. The last swing bottom of 801 to be tested with intermediate swing higher bottom of 826 can offer momentary support. Expect lower range of 836-794.
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NCDEX CoC Weekly July: Expect Higher Range To Be Tested( Price in Rs/Quintal)
Traders long can keep the stop loss at 1882. Addition of long position has been witnessed as open interest increased with the rise and positive candle. Weaker opening and correction to 1938-1908 can be used for buying with a stop loss of 1882. Expect higher range of 1998-2088 to be tested.
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U.S. Market Through The Week:
ICE Cotton futures on Intercontinental Exchange (ICE) hit lowest level in more than three-week on Friday, however recovered some losses as U.S dollar tumbled, but ended the current July month with loss of 6.8 percent, worst since September 2014.
There were many bearish news for cotton, which has added pressure on the fibre not only in U.S, but in other markets too. Chinese equity market suffered a dismal end to a dire month as promises of more emergency measures from officials in Beijing failed to stem a stock market slide that is now reverberating around the global economy. The Shanghai composite index lost 10% this week alone and was down more than 14% for the whole of July.
Also, bearish export report released on Thursday further weighed on prices. U.S. farmers sold 23,000 bales of cotton from the 2014-15 crop, down 75 percent from the prior week, according to a weekly U.S. government export sales report. Sales of cotton from the 2015-16 crop year totaled 4,000 bales.
Strength in dollar has also kept market sentiment nervous as stronger dollar pressures greenback-traded commodities like cotton by making them more expensive to holders of other currencies.
Furthermore, U.S. Commodity Futures Trading Commission on Friday released weekly data that suggest ICe cotton speculators cut net long position by 2,502 contracts to 40,502 in week to July 28.
TOP STORIES THROUGH THE WEEK
Sowing In Gujarat Enhanced This Kharif Season
Favorable weather and good availability of water for irrigation has boosted sowing in Gujarat In the current kharif season. According to Gujarat government, total sowing rose about 52 percent on 20th, July, 2015 this year compared to corresponding period last year. As per state agriculture department, total area under kharif sowing has registered 5.07 million hectares in 2015 as against 3.29 million hectares during last year. Cotton sowing in the state rose 32 percent to 2.34 million hectares compared to 1.77 million hectares last year.
Standing Crop Of Cotton Hope For Second Spell Of Rain - ICF
Standing crop of cotton in most of the growing regions of India need a second spell of rain, Indian Cotton Federation (ICF) said in its latest report. As per ICF, all India cotton sowing report is encouraging with 3.47 million hectares as on June 25, 2015 and that if a second rain spell happens, sowing will progress further. Farmers in Amreli district in Gujarat had to resow due to floods, many other parts of Gujarat are awaiting another spell of rain which is badly needed for the standing crop. In Marathwada region, areas surrounding Aurangabad, Jalna and Nanded, rainfall is very badly needed.
Rains Aid Kharif Crops In MP; But Some Farms Are Getting Flooded
Recent spell of rains, after a 20-day gap, benefited many farmers in Malwa and Nimar regions of Madhya Pradesh. Dhar district is observing good rains after gap of 23 days, benefiting soybean, maize, cotton and pulses crops which have been sown on 5.14 lakh hectares. But, rains continue to lash the south-west parts of the state and some farms are getting flooded.
Most Traders In Maharashtra Exempted From LBT
Maharashtra government today informed the Legislative Council that the controversial Local Body Tax (LBT) would be abolished by August 1 for traders with a turnover of less than Rs 50 crore in 25 municipal corporations. Revenue minister Eknath Khadse said the decision will give relief to 99.85 per cent of traders in Maharashtra and the government will provide financial aid to the municipal corporations which would lose revenue and may not mop up their expected income by the end of the year.
TCP Invites Tenders For 2014-15 Cotton Sale
The Trading Corporation of India (TCP) has invited tenders for sale of 2014-15 Pakistani cotton lying at its Pipri Godown, Karachi. TCP kept minimum offer at 200 bales, while on maximum offer, no limit fixed. However, it received a poor response from spinners against its bid offer for the sale of 95,000 bales from last season.
Pakistan’s Textile Exports Down 1.78% In 2014-15
Pakistan exported $13.48 billion worth of textile in 2014-15, down 1.78 percent compared to $13.72 billion in a year ago period, as per a latest data of Pakistan Bureau Of Statistics (PBS). The major reasons for the fall in country’s exports are acute power shortage and slowdown in economies of China, the European Union (EU) and the United States.
Textile Units In Ichalkaranji Suffers After Rajasthan Close
Ichalkaranji-based textile units producing grey cloth are suffering as client units in Rajasthan have shut down since May for allegedly violating pollution norms. Balotra area of Rajasthan buys around 30-40 percent cloth produced by Ichalkaranji. Around 739 textile units in Balotra are closed following the National Green Tribunal`s (NGT) orders.
Cotton Seed Sales Depressed Due To Lower Planting
Sale of cotton seed this year in India may fall 15-20 percent due to lower planting area. This is despite the south-west monsoon covering most of the country. However, other leading kharif crops such as hybrid rice, maize and soyabean showed a mixed trend in different growing regions. Total area covered under kharif sowing stood at 69.38 million hectares as on July 24 against 55 million hectares around same time last year. Cotton area is reported at 9.9 million hectares, against 10.05 million hectares in 2013-14.
Cotton Crop Prospect In Texas Looks Mostly Good
Cotton crop condition is overall good in Texas amid supportive weather with low insect pressure. Soil moisture is rated as fair. But in rolling plains area in Texas, cotton crop was found to be destroying edges of cotton fields. Here, daytime temperatures inches closer to 100 degrees, good for the crop. Towards South Texas, cotton was flowering, and early planted cotton was opening bolls. Cotton crop in south plains is developing well with the hot weather and irrigation. Scurry county cotton was growing fast but needed rain very soon.
Heavy Rainfall At Most Places - Warns IMD
The India Meteorological Department (IMD) has predicted heavy to very heavy rainfall today and tomorrow over Gujarat, Daman & Diu, Dadra and Nagar Haveli and Saurashtra, Kutch. Moderate rainfall is also expected to occur at most places in the region. Heavy to very heavy rain is also predicted at a few places on 31st July, 2015 over these regions. Similarly, it predicts that rainfall would occur at most places with heavy to very heavy rainfall at a few places over Rajasthan during the next 72 hours and at isolated places over West Madhya Pradesh during the next 24 hours.
FMC Mulls Allowing WSPs Hedge In Futures Market
Forwards Market Commission (FMC) is thinking over allowing Warehouse Service Providers (WSPs) to hedge their exposure in the futures market. It has sought public opinion on the same latest by August 14, 2015. Currently, WSPs are not allowed to trade on the commodity exchange in the commodity for which it is accredited by the exchange. But FMC has set a condition that WSP's should deposit their procured commodities on which they wish to take hedging positions, in exchange-accredited warehouses other than their own warehouses.
Govt Approves Amendments In GST Bill
The Union Cabinet approved amendments to the Goods And Services Tax (GST) to compensate states for revenue loss for five years. GST will ensure a single tax structure for goods and services throughout the country and make India a common market. The amendments were the suggestions of some of the selected panel of Rajya Sabha. GST proposes to replace most central and state levies with one single tax and is projected to add as much as 2 per cent to the country's GDP.
Indian Can Grow To A Multi-Trillion Dollar Economy - World Bank
The World Bank said that India can grow to a multi-trillion dollar economy with a per capita income of about $40,000 By 2050 if it manages to grow at seven per cent annually, for the next 30-35 years. But the bank said to achieve and sustain a seven percent growth rate for 35 years, a lot of transformation in the way economy is managed. India will have to concentrate more towards boosting services sector, it said. It also said that about 55 percent of India's population is already working in the services sector but the country has to aim to bring this to 80-85 per cent of the population.
No Change In CENVAT Rules On Excise Duty For Textile Goods
Finance Ministry of India declared that there is no change in exemption from excise duty for textile goods as mentioned in Central Value-Added Tax (CENVAT) rules 2004. There were confusions in market after the Central Board of Excise and Customs issued a notification saying that the excise duty credit can be claimed by manufacturers of end-products only if previous links in manufacturing chain had paid excise duty for inputs at each of the stages.
Extension Of Crop Insurance Premium Deadline Rejected
Insurance companies have rejected Maharashtra government’s request to extend the deadline for payment of crop insurance premium. State Agriculture Minister Eknath Khadse said that he had spoken to Union Agriculture Minister and Secretary regarding the same and apprised them about the situation. Now, he may meet Union Finance Minister Arun Jaitley.
Agri Dept Suggests Cotton Growers To Monitor Weather
Agriculture department of Punjab, Pakistan, has advised cotton farmers to monitor weather predictions before watering the fields. It said that farmers should adopt proper strategy to drain rain water from fields. Nitrogen fertilizer should be used after analyzing the fertility of the land and crop condition, it said. Farmers are also advised to pay attention in removing weeds which rapidly grow after rain.
APTMA Worried Over Constant Fall In Textile Exports
All Pakistan Textile Mills Association (APTMA) is worried about the continuous fall in the country’s textile exports. Pakistan’s textile sector exports in June registered downward growth by 2.65 percent in value terms. Resultantly, the association has put forward a seven-point proposal for early revival of the textile industry to overcome the dwindling exports. The seven-point proposal included zero rate regime for the textile industry, extension of the long-term finance scheme for ginning and spinning industry, etc.
(By Commoditiescontrol Bureau; +91-22-40015534)
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