MUMBAI (Commoditiescontrol) – Cotton markets across the globe ended the week on a positive note.
Let’s first look at how the global market faired throughout the week. US MARKET:
The US cotton market was ended the week on a positive note reversing the bearish trend witnessed last week.
The March contract on the ICE Futures was up by more than 1 percent over the week to settle at 73.04 cents/lb on Friday.
Market participants were clueless of the outlook as the trading activity was lean with the strong USDA sales being the only supporting factor. At the moment, fundamentals were not ruling the market but the balance of massive spec long and trade short positions.
The USDA weekly upland sales surged 47 percent at 346,500 Running Bales (RB) in the week of January 6-12, from previous week’s 236,000 RB. (Full Report)
CHINA MARKET:
Chinese market ended the week marginally higher 0.76 percent as the most active May contract settled at 15,295 yuan/tonne on Friday compared to same day in the previous week at 15,180 yuan/tonne.
Over the week, open interest declined nearly by 11 percent to 258,800 lots whereas volume sharply decreased 42 percent to 170,834 lots.
Market participants were gearing up for the Lunar New Year which will be celebrated on January 28.
INDIAN MARKET:
The Indian cotton futures ended the week strong as the benchmark February contract rose 1.4 percent during the week to settle at Rs 20,400/bale on Friday.
Over the week, open interest increased 17 percent to 8,882 lots whereas volume for the week down 3 percent at 307,280 bales compared to previous week’s 317,275 bales.
Technically, the contract may likely to the test the range of Rs 20,587-21,107 with stop loss at Rs 19,900/bale.
DOMESTICSPOT MARKET:
Spot cotton in the domestic market continued its upward trend as it marginally increased by nearly 0.6 percent mainly due to lackluster selling activity at lower price amid limited demand.
The average price of cotton (30mm) in Maharashtra during the week increased by 0.5 percent to Rs 41,970/candy from Rs 41,760/candy in the previous week.
Similar trend prevailed in Gujarat with the average price of (Shankar 6 A Grade) cotton pegged at Rs 41,850/candy, up by 0.4 percent compared to Rs 41,690/candy last week.
The market witnessed a minor downward correction at the beginning of the week as prices fell by Rs 200-300/candy, however, it bounced back on Wednesday with prices surging Rs 500/candy to average between Rs 40,800-42,250/candy. The uptrend continued following the strong global cues on Thursday and prices jumped Rs 800/candy from previous day to average between Rs 41,600-43,000/candy.
Poor raw cotton arrivals during the week led ginners quoting higher which was the major factor for pushing price higher during the week. Further, mid week strong global cues was the other factor fuelling prices this week.
Amidst the bullish sentiment, buyers concluded deals cautiously keeping a close watch on the price as the premium price quoted by sellers was not viable for them, awaiting downward correction to make their purchases. Need based buyers did not have any option but to purchase at a higher rates although lean volumes.
Meanwhile, exporters were busy delivering their previous commitments as the demand from the international front was very limited due to the surging price in the market.
Trade activity in the yarn market continued to remain hand to mouth as spinning mills were quoting higher price citing surging cotton bales price. Yarn price inched up by Rs 10/kg for 60s carded yarn in Coimbatore to range between Rs 1,190-1,210/per 5 kg.
Raw cotton (kapas) arrival, collated from trade sources, for the week(Jan 16-20) was at 6.96 lakh bales, witnessing a 6 percent fall compared to previous week(Jan 09-13) at 7.39 lakh bales.
Meanwhile, Cotton Corporation of India (CCI) in its latest report said that 128 lakh bales had arrived as of January 19, down 5 percent compared to arrivals in same period in 2015-16 at 135.14 lakh bales. (Full Report)
At this time of peak season, daily arrivals are on an average around 2.25 lakh bales. However due to farmers limiting their selling in hopes of better price in the near futures, led to a decline in arrivals since the beginning of this season.
The April contract for Kapas on the NCDEX Futures marginally increased 1 percent over the week and settled at Rs 1013/per 20kg on Friday. Conclusion:
Cotton markets in India may continue the uptrend in the coming week as kapas arrivals will continued to remain sluggish. Until arrivals pickup, prices are unlikely to witness any downward correction. With production pegged at 346 lakh bales as per Cotton Advisory Board (CAB) and private estimates ranging between 330-340 lakh bales, about 2/3rd of the crop is yet to arrive in the market. Leading spinning mills and MNCs have coverd the position until end of February. However, the sharp correction will not be seen in near term but may occur in March and minor oscillation can be expected in the interim.
(By Commoditiescontrol Bureau; +91-22-40015534)
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