Commoditiescontrol) – World cotton market were hit hard last year due to excess supply and slowdown in demand, particularly from China - the largest consumer of cotton. Indian cotton industry too felt the pressure and prices last year have fall below minimum support prices. That led Cotton Corporation of India (CCI) to intervene.
Exports last year were not encouraging as well due to the change in China cotton buying programme. However, the domestic consumption recorded decent growth. Domestic cotton prices did revived by the end of the season, which was supported by intention of lower cotton sowing by farmers followed by erratic weather.
According to most recent data of agriculture department, cotton acreage in the country as on October 8, 2015 dropped over 7 per cent at 116.89 lakh hectares compared with 126.54 lakh hectares a year ago. Last year cotton crop was hurt by delayed rain which resulted into a poor yield in Gujarat, Maharashtra, Andhra Pradesh.
Cotton production in the country is expected to be significantly lower than last year due to lower acreage, poor rainfall and pest (white fly) attack in Punjab that has ruined a large chunk of crop in the state.
According to trade sources, cotton production in the country this year is unlikely to cross 350 lakh bales (170kg each).
2014-15 Cotton Supply-Demand Forecast
The country has produced around 363 lakh bales (CC Estimate) of cotton during 2014-15, while carry forward stocks of 32 lakh bales (CAB Estimate) and 14 lakh bales of imports take the total availability at 409 lakh bales.
Domestic consumption of cotton by mills, including small & non mill were projected at around 339 lakh bales, while exports were estimated at 57.45 lakh bales. Total cotton consumption during 2014-15 totaled 396 lakh bales. Carry forward cotton for 2015-16 likely at 12 lakh bales, while estimated cotton unsold stocks with mills/private traders to be 15 lakh bales. Carry forward stocks in the country this year is projected lowest in last 10 years.
Note: CCI holds around 15 lakh running bales (around 160kg each) of cotton
Near Term Cotton Price Outlook
Cotton prices in the near term i.e. during October month likely to trade steady-to-firm supported by tight balance sheet and good export demand. According to trade sources, the exporters have already negotiated around 70,000 bales of cotton for forward shipment. Of which, 50,000 bales were likely to be shipped to Pakistan.
However, the recent appreciation in Indian currency has raised concern among exporters as it may hurt futures exports demand from overseas buyers. Strong rupees makes export incompetitive.
Long term cotton prices will be well supported by lower production this year and increasing domestic cotton consumption.
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TECHNICAL OUTLOOK
MCX Cotton Bales Weekly: Further weakness is below 15630
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(By Commoditiescontrol Bureau; +91-22-40015533)
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