MUMBAI (Commoditiescontrol) - Increased mills buying, dwindling arrivals by each passing day followed by strong international market pushed domestic cotton prices higher during the week ended (May 14-18). The benchmark S6-Gujarat cotton rose 1.07% at 42,650 per candy (356kg each).
The weekly average price of the benchmark premium variety (30mm) cotton in Maharashtra rose 0.5% to trade at Rs 41,850/candy. Prices in other states gained in the range 0.12% to 1%.
Sellers having cotton stock are reluctant or selling gradually, smelling bullish tone ahead due to declining cotton stocks, especially premium quality. However now the stock leftover with ginners and stockists are mostly of good quality as they have mostly liquidated medium-small grade earlier at attractive rates.
Further sellers having cotton stock are preferring to sell cotton in small lots as they are waiting it to liquidate after rain arrival. The weigh of cotton will increase lying in warehouses after rainfall as it soaks moisture, according to traders.
Spinners purchasing cotton as per their near-term requirements as domestic sales of cotton yarn were said to slow however export sales were in line with market expectations. The activity in yarn market will remain subdued at least for one month due to Ramzan.
The export sector of the textile industry benefitted more this season on weaker rupee which depreciated 6% this year breaching the key 68 level. The rupee ended at 68.01 against the US dollar.
On the supply side, cotton arrivals averaged at 0.48 lakh bales during the week due to fag end of the supply season. Total supply during the current week (May 14-19) lowered to an estimated volume of 2.90 lakh bales compared to 2.86 lakh bales in the previous week, and higher compared to corresponding week last season at 2.47 lakh bales.
Total new crop arrivals, since Oct 1, have reached 29.43 million bales up 7.33% from 28.10 million bales arrived during the same period last year.
Meanwhile, cotton sowing is making good progress in North India after availability of ample water through canals. Planting is expected to get completed by the month-end.
Acreage in Punjab may decline, but likely to be around last year’s level in Haryana and Rajasthan, according to trader.
Meanwhile onset of monsoon is likely earlier this season at May 29 with +/- of 4 days, according to IMD and may help timely sowing in central and south India, but it will interesting to see whether farmers will reduce acreage under fibre as they have incurred huge losses last year specially in Maharashtra due to pink boll worm.
FUTURES MARKET
MCX cotton futures settled this week with gain of over 1% at 20,900 per bale due to increased demand tracking firm tone in the spot market and global market. The contract during the week hovered between Rs 20,350 to Rs 20,940.
CONCLUSION
Domestic cotton prices are likely to trade positive in the near term due to good demand from local mills against declining arrivals. Production issues over U.S. and China, with some uncertainty over India's cotton fields too also likely to support prices. Supplies of high-quality cotton are already short, and lower-quality fiber also is getting tighter.
(By Commoditiescontrol Bureau; +91-22-40015533)
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