MUMBAI (Commoditiescontrol) – As 2016 reach a closing with most cotton markets reporting 30 December as the last trading day, average prices have registered 4-18 per cent increase during the year, but could partially recover the falls of 15-22 per cent recorded in 2015. Prices are even halfway below the levels of 2011, the all-time high. However, prices in 2016 are at 3-year high and termed as best year after two consecutive years of decline.
Prices in India and Pakistan were supported by lesser production (than anticipated in initial stage) while climatic conditions in Texas ruled the US markets. China with bumper stock released it State Reserves at lower than market prices to reduce the inventory burden. It has also imposed riders of cotton imports to offload its reserves.
The year-end to year end comparison shows Indian cotton gaining Rs5,700 per candy of Shankar-6 while KAC spot is up PakRs.1,000 per maund. In China, cotton index rising 2,875 Yuan a ton. Global benchmarks, the US Futures closed US cents 5.75 per pound up and Cotlook A index gaining US cents 8.80 per pound. Brazil CEPEA Index was the sharpest to rise at US cents 29.06 per pound.
2017 may see prices trending up in the first half of the year, as world’s top and also a surplus producer, India is seeing some stoppage in trading activity at the beginning of the year due to demonetization policy. This has led to stocking of cotton at the farm level, and their arrivals at mandis may normalise by the end of Q1 2017. Meanwhile, cotton hungry nations like Pakistan, Vietnam and Bangladesh will scout for alternate supply from Australia, Africa and USA, which may only partially feed the demand at higher prices.
As the season progress into the lean period, India will have enough surplus for export and meet domesic demand commanding higher prices. Thus, for cotton markets there could be one more year of price recovery. Nevertheless, this recovery will depend on how China will react to any surges through its State Reserve Auction beginning early March.
(By Commoditiescontrol Bureau; +91-22-40015522)