MUMBAI (Commoditiescontrol) - Cotton prices in domestic markets softened during the week ending 12th September, 2015. Prices in north India weakened Rs 40-60/maund (37.3kgs each), while prices fell upto Rs 200-700/candy (356kgs each) in central Indian markets.
New Crop Arrivals In Domestic Markets
As many domestic markets have started receiving new crop arrivals since the start of this week, momentum in spot markets came to a halt, though new arrivals are yet to pressure prices significantly. The fresh sluggishness in market is due to subdued buying interest by domestic mills and spinners. Last week, domestic cotton prices moved upside tracking bullish fundamentals which triggered demand.
Throughout the week, north Indian markets received around 600-700 bales of new arrivals, Madhya Pradesh saw arrivals of about 200-300 bales, while south markets recorded supply of around 1000-1,500 bales of new crop. However, these arrivals are much lesser than it was a year ago in almost the same period. Last year same period, initial daily arrivals were at around 4,000 bales.
According to traders, new arrivals are likely to gather momentum by 15th September, 2015 in north Indian markets. Prices may start feeling some pressure once the arrivals pick up, traders believe.
Traders & Stockists Liquidate Stocks
Over the last few sessions, private traders and stockists were also seen active in releasing their stocks finding the current level attractive. They were sidelined and halted releasing their stocks from a long time due to recent gains in prices and on hopes of better benefits in the future. Now that the momentum has paused, stockists intend to offload their stocks as soon as possible before the prices slide lower. In addition, few traders are reportedly liquidating cotton purchased from Cotton Corporation of India (CCI) at the current level.
Regular E-Auctions By CCI
The government nodal agency is regularly putting up cotton E-auctions for domestic textile mills and spinners. It has been receiving strong buying for its cotton until two sessions ago amid reports of crop uncertainty and crop damage due to weak monsoon rains and pest attacks on cotton crop.
Throughout this week, CCI sold 2,52,028 bales out of 5,75,828 bales from its stockpile. It had increased floor prices by Rs 200-300/candy throughout all the centres. The agency has sold around 64,62,468 bales till 11th September, 2015 from around 87 lakh bales procured from farmers in the current season. As on 11th September, CCI had unsold cotton stock of around 22,29,532 bales.
Chairman B.K. Mishra said that the agency close to selling 15 lakh bales in the next few days and put another five lakh bales on auction by end of this season. He said that the corporation intends to cut inventory to 5 lakh bales before September-end, the close of cotton year 2014-15, even as it gears up for new season.
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Yarn Market Still Feel The Brunt Of Muted Demand
After a slight spurt in demand last week, yarn prices traded weak for most of this week due to lack of demand from processors. At exports front, there is no demand for normal yarn from Bangladesh, while demand for special yarns like BCI cotton yarn and organic cotton yarn is encouraging.
Indian spinning mills are currently having surplus capacity to the tune of 20 to 30 million kgs per month. India expanded its spinning capacity considerably during the last two years taking advantage of the new State Textile Policies and the regular demand did not keep in pace with the supply. Indian spinning mills were hoping bigger demand from China which did not take place due to the Chinese policy and the recession in the Chinese economy. The situation might continue for two months.
A Bathinda-based veteran trader Mr. Fatehchand Sharma said that yarn prices are likely to stay range-bound in the near-term.
Yarn market will see any improvement only when the huge inventory with mills is reduced. Currently, textile mills are incurring losses of nearly Rs 7-8/kg.
Many mills in north have cut down their production by 15-20 percent of existing stocks. Larger mills continued to work with full capacity.
Southern mills also started cutting down their production during the last month to mitigate the challenges posed by the yarn market. Mills have to continue cutting down the production till China market revives. The demand for compact yarn, particularly fine and superfine counts is encouraging. Though the demand for yarn from Europe market started looking up, there is price pressure.
Southwest Monsoon Revives In Few Pockets
Maharashtra’s Marathwada, Madhya Maharashtra, north interior Karnataka and Kerala witnessed revived rainfall this week.
This year’s poor monsoon rains in Maharashtra’s Marathwada, Vidarbha region, Telangana, Karnataka and Andhra Pradesh has been a matter of concern for farmers and traders together. After a vigorous start in June, monsoon rains remained weak till date.
WEEKLY WEATHER ROUNDUP: Southwest Monsoon Seen 55% Below Normal This Week
The country as a whole received below normal rainfall of 55 percent during 3-9 September, 2015, as per the Indian Meteorological Department (IMD). The northwest part of India received least rainfall of 3.7MM against normal rainfall of 36.3MM, a deficit of 90 percent.
The Southwest monsoon showed signs of withdrawal from western parts of Rajasthan on 4th September and from some parts of Punjab and Haryana and few more portions of Rajasthan on 8th September. The withdrawal line of southwest monsoon passed through Amritsar, Hissar, Ajmer and Barmer.
During the week, central India recorded rain deficit of 76 percent with actual rainfall of 13.5MM compared to normal rainfall of 55.4MM. East and Northeast India recorder a deficit of 53 percent with actual rainfall of 34.4mm against normal rainfall of 72.8mm.
On the other hand, rainfall over South Peninsula exceeded normal rainfall range of 30.8mm and recorded actual rainfall of 50.9mm.
For the country as a whole, cumulative rainfall during monsoon season has so far up to 9th September, 2015 been 15 percent below the Long Period Average (LPA). Rainfall activity was less than normal in all the four broad homogeneous regions of India except east & northeast India, where it was near normal. In the meantime, southwest monsoon was vigorous over north interior Karnataka and active over Madhya Maharashtra, Marathawada, Rayalaseema and Kerala yesterday.
Long Range Forecast For Coming Weeks:
The weather office forecast normal to above normal rainfall activity over South Peninsular India during the next 3 weeks. Normal to below rainfall activity likely over plains of northwest India and central and adjoining east India during next the 2 weeks. Normal to above normal rainfall activity likely over northwest, central and east India between 24-28 September.
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Cotton Crop Condition Across The Country:
Current crop condition in Vidarbha region of Maharashtra is satisfactory. In Gujarat, Telangana and Vidarbha crop is in flowering to boll formation stage. Crop in Punjab, Haryana and northwest Rajasthan is in phase of boll formation to development stage. Resumed rainfall over Marathawada, north Karnataka and Telangana region has saved cotton crop from withering. However, crop in these regions is stunted and have less branching and reduced flowering.
Sowing Figures As On 11th September, 2015
However, sowing area under cotton is constantly shrinking, indicated by government figures. Missing rains over most of the major growing regions have put a roadblock for farmers to sow the crop in their fields.
According to the central government data, all India cotton sowing area reduced to 114.75 lakh hectares as on 11th September, 2015 compared to 125.29 lakh hectares in the corresponding period last year.
Below is the state-wise sowing data as on 11th Sept:
| State |
Normal |
Current |
Previous |
Change % |
| Andhra Pradesh |
5.15 |
5.75 |
7.1 |
-19.01 |
| Telangana |
15.12 |
16.73 |
16.35 |
2.32 |
| Gujarat |
27.25 |
27.58 |
30.06 |
-8.25 |
| Haryana |
5.7 |
5.81 |
6.39 |
-9.08 |
| Karnataka |
5.12 |
4.97 |
7.6 |
-34.61 |
| Madhya Pradesh |
6.31 |
5.47 |
5.79 |
-5.53 |
| Maharashtra |
40.5 |
38.24 |
41.71 |
-8.32 |
| Orissa |
1.09 |
1.25 |
1.25 |
0 |
| Punjab |
5.12 |
4.5 |
4.5 |
0 |
| Rajasthan |
3.89 |
4.06 |
4.16 |
-2.4 |
| Tamil Nadu |
0.16 |
0.18 |
0.07 |
157.14 |
| All India |
115.74 |
114.75 |
125.29 |
-8.41 |
| In Lakh Hectare |
|
|
|
|
Crop Loss Fear Due To Whitefly Attack
Due to whitefly attack on cotton crop, nearly 15 percent crop is estimated to have been totally damaged, reports suggest. Citing this, Mr. Fatehchand Sharma estimates 49 lakh bales of cotton output in the region compared to 56 lakh bales last year estimated by Cotton Advisory Board (CAB). He expects the new season to be better than last year and prices are likely to stay firm.
Market sources said that farmers in Bathinda, Muktsar, Fazilka, Mansa, Ferozepur, Faridkot and Moga districts of Punjab have uprooted cotton crop on over 5,000-6,000 acres losing hope on saving their crop from whitefly attack. Farmers were assuming that dry weather winds would blow away the whiteflies from their crop, but in vain.
Weekly Technical Update
MCX Cotton Bales Weekly: Breakout Above 16610 Is Essential
Exit long on rise from 16130 to 16447 as the opportunity arises. Further rally can be seen above 16610- breakout and broadly till then use rise to exit long position.
(Click Here For Full Story)
NCDEX Kapas April’16 Weekly: Expect Lower Range To Be Tested
Exit long and sell on rise from 851.5-880.8 with a stop loss of 895. Expect lower range of 836.3-791.8 to be tested. Support point is at 823 and the same is likely to be tested.
(Click Here For Full Story)
SPECIAL COVERAGE THROUGH THE WEEK
USDA Forecasts U.S 2015-16 Cotton Production Higher Vs August
The 2015-16 U.S. cotton supply and demand forecasts include higher production, exports, and ending stocks compared with last month. Production is raised to 13.4 million bales, as an increase of 458,000 bales for Texas is partially offset by revisions for other states. Domestic mill use is unchanged. Exports are raised to 10.2 million bales based on the larger available supply (Click Here For Full Report).
USDA Rates U.S. Cotton Crop 53% Good/Excellent, Down From Prior Week
The U.S. Department of Agriculture (USDA) in its weekly crop progress report for the week ended 6th September, 2015 rated U.S cotton crop 53 percent good/excellent, slightly below 54 percent in the previous week. According to the report, 31 percent of the crop reached bolls opening stage in all the 15 major cotton growing states during the week compared to 22 percent a week ago and below five year average of 38 percent (Click Here For Full Report).
India’s 2015/16 Cotton Output Seen Lower At 290 Lakh Bales - USDA Attache
India is likely to produce around 370 lakh bales (170kgs each) of cotton in the marketing year (MY) 2015-16, as per U.S. Department of Agriculture’s (USDA) latest attache report. Lower production estimate is attributed to deficient rains in the latter half of the monsoon season. Poor monsoon in the current season led to slow boll development and maturation.
Additionally, sources report instances of pest pressure (pink bollworm in areas of Gujarat and white fly in Punjab). As a result, yield in 2015-16 is estimated at 524 kg per hectare, marginally lower than the five year average of 527 kg per hectare (Click Here For Full Report).
China 2015-16 Cotton Output Likley Down 5.5 Million Tons
China cotton production is forecast to decline at 5.5 million tons in market year 2015-16 that begins from August 2015, amid projected 19 percent fall in planted area in response to the lower government’s price support for cotton planting, according to USDA attache report. However USDA has revised cotton consumption slightly up at 7.5 million tons with cotton imports are forecast to plummet to 1.25 million tons in 2015-16 from the 1.8 million tons previous year due to due to the limited issuance of additional import quotas driving the Chinese industry to use imported cotton yarn (Click Here For Full Report).
Brazilian Cotton Export Parity Rises 6.1% In August On Strong Dollar
Domestic cotton prices in Brazil are moving upside helped by delayed harvesting and inactivity by the sellers/stockists. The CEPEA/ESALQ Index for payment in 8 days for cotton type 41-4, which includes freight to Sao Paulo grew 5.66 percent in August and export parity rose 6.1 per cent in the month, pushed up by the high dollar. While the dollar rose 6.32 percent against the Brazilian Real, Brazilian cotton sellers increased closure of export contracts in August, motivated by the strong dollar (Click Here For Full Report).
TOP STORIES THROUGH THE WEEK
Spinning Mill Closed In Punjab
The Malwa cotton spinning mills limited shuts operation. This happened at the time when state government is trying to attract investments. The mill was seen as a flagship spinning industry unit in Punjab. Mill closing in Barnala on 31st August leaving more than 350 workers and employees to protest for salaries and dues.
India Cotton Output May Drop
India cotton output may drop 15 percent this year. Insufficient rain and pest attack in north India mainly weigh on crop. Cotton crop in Gujarat has been hit by weak rainfall after a good sowing period, when the monsoon was strong. Rainfall in the region is patchy and 28 percent below normal. The situation is also worrisome in Maharashtra. "Lack of rains in central Maharashtra could affect the crop," said KR Kranthi, Director, Central Institute Of Cotton Research, Nagpur. In Punjab and Haryana, crop is at risk of damage from whitefly attack. The pest hit hard traditional cotton belts in these states and some districts of Rajasthan. The region faced pest attacks in the last two years, but had been milder in the past.
PCGA Warns To Buy Cotton As Per Requirement
Pakistan Cotton Ginners Association (PCGA) warned ginners not to purchase seed-cotton in abundance. The association said, buy as per requirement, huge buying from farmers may lead them to bear financial losses.
Cotton Buying In Telangana
Private traders to start market yarn operations by September-end in Telangana. Cotton Corporation of India (CCI) also may commence procurement by October 5. CCI, Adilabad Branch Manager K.M. Reddy said payment to be made to farmers would be directly credited to their bank accounts within 8 days of the sale of the produce.
TCP Should Be An Alternative Buyer Of Cotton - PCGA
Pakistan Cotton Ginners Association (PCGA) Wants Trading Corporation of Pakistan (TCP) To Buy Cotton And Announce Support Price. PCGA Said Textile Millers Exploit Cotton Farmers. PCGA Urged Govt To facilitate Manufacturers And Exporters To Generate Demand For Cotton.
Australia 2015/16 Cotton Output Seen Lower At 470,000 Tons
Australia’s cotton production may reach 470,000 tons in 2015-16 from 450,000 tons a year earlier, Abares estimated. The bureau forecast output at 520,000 tons in June.
SISPA Urges Tn Govt To Cut VAT On Cotton
South India Spinners Association (SISPA) urged Tamil Nadu government to cut value added tax (VAT) on cotton, cotton yarn and synthetic yarn to 2 percent from 5 percent. SISPA said that CST in neighbouring states is only 2 percent. 5 percent VAT in Tamil Nadu has made locally manufactured goods expensive.
Falling Rupee May Have Mixed Impact On India’s Textile Exports - ICRA
ICRA said falling rupee may have mixed impact on Indian textile exports. Rupee depreciation improves export competitiveness of domestic cotton, as India is world’s second largest cotton exporter after U.S, it said. But it said given the rupee depreciated more than that of other competing countries, and India's share in overall trade is relatively small, export volumes may not be impacted severely.
Cotton Farmers Protest Against Sale Of Fake Pesticides
Punjab cotton farmers on Tuesday staged an infinite strike against sale of fake pesticides. The decision is taken even after state government announced to initiate a girdwari to assess loss to cotton growers. Though the farmers had planned to protest outside the residence of chief minister Parkash Singh Badal at Badal village, but the police foiled their plans and disallowed them to march towards the CM's village.
Gujarat May Abolish Vat On Narrow Fabrics
Government of Gujarat may do away with 5 percent value added tax (VAT) on narrow fabrics manufactured in Gujarat. The government imposed 5 percent VAT on narrow fabrics during the state budget in February-2015. In Surat alone, there are around 300 small and big manufacturers of narrow fabrics.
Falling Rupee To Benefit Indian Apparel, Fabric Exporters
Depreciating value of the Indian Rupee against the dollar has increased India’s competitiveness in apparel exports to developed countries, thanks to relatively lower decline in currencies of its competitors, including China, Vietnam and Bangladesh. After the Chinese currency, yuan, was first devalued on August 10, the rupee recorded its sharpest depreciation among its competitors. While Indian rupee depreciated 4.63 per cent to 66.83, the yuan (renminbi) fell 2.51 per cent to 6.37 against the dollar as of Monday since August 10.
China Cotton Demand To Rise For First Time In Six Years
Chinese cotton consumption is to grow for the first time in six years, helped by the boost to industry prospects from a weakened renminbi – although the increase in demand will do nothing to slow a slump in imports. The U.S. Department of Agriculture (USDA) pegged at 34.5m bales China's cotton consumption in 2015-16, a rise of 500,000 bales year on year.
CCI Hopes To Cut Inventory To 5 Lakh Bales
CCI hopes to reduce inventory to 5 lakh bales by the End September. Current cotton stock with CCI is around 25 lakh bales. So far, it sold around 62 lakh bales for about Rs 12,000 crore from its stockpile. Chairman BK Mishra said CCI is close to selling 15 lakh bales in next few days.
KCA Wants Direct Subsidy On Acreage Sown
Karachi Cotton Association (KCA) wants Pakistan government To provide direct subsidy to cotton farmers on the basis of acreage sown. It said intervention by govt through Trading Corporation Of Pakistan (TCP) will be inefficient. Government can also provide support through subsidize electricity and fertilizer to reduce production cost, KCA said.
July Cotton Yarn Exports Up 11 Percent
Pakistan exported 50,373 tons of cotton yarn in the first month of new fiscal year, up by 11 percent, according to Pakistan Bureau of Statistics. Increase in cotton yarn export stood at 4,966 tons in July 2015 compared to the yarn export of 45,407 tons in July 2014, PBS said. The country's cotton yarn export, in terms of value, dipped to $117.598 million in July 2015 from $134.459 million in July 2014, falling by 13 percent or $16.861 million. As comparing to the cotton yarn export of $120.347 million in June 2015, the commodity's export declined by over two percent or $2.749 million in July 2015. Cotton yarn export volume remained almost stagnant in July 2015 comparing to the commodity's export in June 2015.
Chinese Demand Prospect Unlikely To Support Cotton Prices
Though China’s cotton demand in new season is pegged higher by traders and various associations, prices are unlikely to get support. Chinese cotton imports are expected to continue to fall in next season as well unless quotas are removed. China has large cotton reserves of about 12 million tons.
OUTLOOK FOR NEXT WEEK
Commoditiescontrol.com foresee cotton prices trading steady during the next week owing to possible steady demand from domestic textile mills. Expected surge in new crop arrivals by 15th September will cap gains.
As for CCI, it may slash its floor prices or may keep them unchanged in the next week in its attempt to reduce its cotton stockpile.
(By Commoditiescontrol Bureau; +91-22-40015532)
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