Cotton Weekly: Bullish Trend Prevails Across Cotton Markets

MUMBAI (Commoditiescontrol) – Bullish trend prevailed across key cotton markets throughout this week.

Let’s first look at how the global market faired throughout the week.

US MARKET:

The US cotton Futures ended the week on the bullish note as March contract on the ICE registered its biggest weekly gain in 3 weeks. The contract was up 2.48 percent over the week to settle at 74.85 cents/lb on Friday.

As per the latest CFTC report, the unfixed on call sales increased to 11.83 million bales of which, 3.55 million bales to cover in March itself.

With a large number of mills fixation outstanding and only 3 weeks remaining for the deadline, mills have a limited time to act, which could lead to upward pressure, especially if speculators continued to sit tight, said plexus cotton in weekly report.

Meanwhile, the USDA weekly upland sales registered a marketing year high, increasing 32 percent to 457,000 Running Bales (RB) in the week of January 13-19, from previous week’s (January 6-12) 346,500 RB. (Full Report)



CHINA MARKET:

Chinese market ended the week up 3 percent as the most active May contract settled at 15,650 yuan/tonne on Thursday compared to same day in the previous week at 15,190 yuan/tonne.

Over the week, open interest increased 1 percent to 271,072 lots whereas volume sharply decreased 51 percent to 95,640 lots as market participants were gearing up for the Lunar New Year which will be celebrated on January 28. Market will remain closed for Lunar New Year holidays next week.



INDIAN MARKET:

The Indian cotton futures ended the week marginally higher as benchmark February contract rose 0.8 percent to settle at Rs 20,520/bale on Friday.

Over the week, open interest increased 1.3 percent to 8,660 lots whereas volume for the week rose 32 percent at 4.45 lakh bales compared to previous week’s 3.07 lakh bales.




DOMESTIC SPOT MARKET:

Spot cotton prices continued to remain positive as they increased 3 percent over the week to average between Rs 42,700-43,500/candy. In Maharashtra 30mm prices increased 3 percent to Rs 43,100/candy from Rs 41,970/candy in the previous week.

Similar trend prevailed in Gujarat with Shankar 6 A Grade cotton pegged at Rs 42,825/candy, up 2.3 percent compared to Rs 41,850/candy last week.

Mid week saw some downward correction in prices influenced by weak global cues on Tuesday and prices fell Rs 550/candy to average between Rs 42,100-44,150/candy on Wednesday followed by a steady trend during the week.

Further, the bullish sentiment was also supported by ginners holding back their stock due to sluggish arrivals since beginning of the year which was fuelling the market. Cotton increased nearly Rs 1,000-1,200/candy over the week, while it has surged nearly Rs 2,500/candy since the beginning of the year.

Leading spinners and MNCs have stocked inventories to meet their requirements until mid-February and now doing only need-based buying.

Meanwhile, raw cotton (kapas) arrivals, collected by Commoditiescontrol, for the week (Jan 23-27) was at 6.96 lakh bales, a similar quantity compared to previous week (Jan 16-20) at 6.96 lakh bales.

Arrivals has improved later in the week touching daily average of 1.80 lakh bales. Farmers were seeing lucrative price for their stocks as the kapas crossed Rs 6,000/quintal mark during the week.

Conclusion:

Looking at the improvement in arrivals and demand slackening, cotton markets will turn bearish. However ginners were reluctant to offload at a lower price creating an artificial shortage leading to surge in prices as they were purchasing raw cotton at a higher price of Rs 6,000/quintal. Until daily arrivals reach the normal levels of 2.25 to 2.40 lakh bales prices are unlikely to see any sharp correction.

Cotton production is estimated at 341 lakh bales as per Cotton Association of India (CAI) and private estimates are around 320-330 lakh bales. With more than 68 percent of cotton yet to arrive, in order to stay competitive globally, cotton prices should come down.

Minor oscillation may be witnessed with market participants talking up prices and striking deals according to their terms and conditions.

(By Commoditiescontrol Bureau; +91-22-40015534)