MUMBAI (Commoditiescontrol) - True to our last week’s estimate (7th November, 2015), cotton prices traded more or less steady in domestic markets throughout the week ending 14th November, 2015. Overall activity in the commodity was sluggish in the wake of festivals, with most of the major markets being closed. Inactive trade in the commodity restricted any significant change in prices.
During the week, prices of J-34 cotton in Punjab traded between Rs 3,450-3,475/maund (37.3kgs each). In Gujarat, S-6 traded in the range of Rs 31,500-32,500/candy (356kgs each). Prices of seed cotton declined Rs 50-70/100 kg across the country due to slow offtake.
CCI’S MARKET OPERATIONS
The Cotton Corporation of India (CCI) started its minimum support price (MSP) operations across Andhra Pradesh, Telangana and Maharashtra, but on a smaller scale. Till 9th November, 2015, it has procured around 28,648 quintals in Telangana, according to its website. Explaining its delay in starting procurement activity in a full-fledged manner, CCI Chairman Mr. B.K. Mishra said farmers are getting higher prices than the MSP in Andhra Pradesh and Telangana and therefore there is no requirement for the agency to act in a major way.
CCI may restrict its MSP operations to only 20-25 lakh bales in 2015/16 as cotton seed prices are higher than support price, the Chairman informed. It targets to set up a total 43 centres in AP And 50 Centres in Maharashtra. Kapas prices are ruling at Rs 4,500 per quintal in Punjab, Rs 4,400 in Gujarat, over Rs 4,200 in Maharashtra. In Telangana, prices in most parts of the state are ruling above Rs 4,200 per quintal.
At its e-auction this week, the government procurement agency has sold around 8,400 bales of cotton from around 1,22,300 bales put up for sale. CCI has been receiving poor response for its cotton from the last few sessions. The main reason being overall limited activity in domestic markets. Besides, there are quality issues with unsold cotton left with it, prompting buyers to meet their needs from physical markets. CCI is left with around 7 lakh bales of unsold cotton stock from 2014/15 year.
FACTORS TO IMPACT PRICES IN THE LONG-RUN:
For Price Rise -
1. Lower Crop Estimates In 2015-16
2. Slight Improvement In Yarn Prices
3. Hand To Mouth Cotton Stock Position With Mills
4. Slow Domestic Cotton Supply, Particularly In North India
5. Exports Demand May Rise From Pakistan, Vietnam & Bangladesh
6. Indian Prices Cheaper In International Markets
Against Price Rise -
1.High Unsold Stock With CCI As Well As Big Merchants
2.Reduced Chinese Demand
3.Slow Consumption In Near-Term
4.Liquidity Pressure In Cotton Complex
U.S. MARKET THROUGH THE WEEK:
On Intercontinental Exchange (ICE), December cotton contract continued to slide lower and closed the week at 61.84 cents/lb, while March contract closed the week at 62.16 cents/lb. Speculators began rolling their positions in March contract from the December contract. Only traders are holding their position in the spot (December) contract. The March contract has taken over as the lead month.
The key highlight of the week was USDA’s month supply & demand report, that strengthened long-term market sentiment to some extent. The report showed that further declines in global production and mill use. Global production was lowered by another 1.75 million, with Pakistan and India both losing 0.5 million bales. Compared to last season world production is now 13.3 million bales smaller at just 105.6 million bales. This is the second lowest global output in 12 years – only the 2009/10-season produced fewer bales at 103.4 million bales.
The USDA lowered mill consumption by only 0.7 million to 111.6 million bales, which would still be 1.3 million bales more than last year and 1.5 million bales more than two seasons ago.
However, weekly export sales data of US grown cotton released by the USDA has its impact on trading, dragging prices lower forcing March contract to end 0.17 cents down at 61.99 cents per lb, the lowest for the second-month since October 13.
SPECIAL COVERAGE THROUGH THE WEEK:
U.S Cotton Weekly Export Sales Down At 127,900 RB
U.S Cotton net upland sales totaling 127,900 RB for 2015/2016 were down 13 percent from the previous week, but up 32 percent from the prior 4-week average. Increases were reported for Vietnam (35,300 RB, including 1,700 RB switched from South Korea and 1,000 RB switched from Japan), Turkey (31,100 RB), China (11,200 RB), Indonesia (9,200 RB), and Taiwan (8,400 RB). Reductions were reported for South Korea (1,600 RB) and Japan (500 RB). Net sales of 1,100 RB for 2016/2017 were reported for Peru (600 RB) and Japan (500 RB) (Click Here For Report)
USDA Lowers 2015/16 Global Cotton Output Estimate; Ups Consumption
The U.S. Department of Agriculture (USDA) in its November estimate lowered global cotton production to 105.63 million bales (480 pounds each) from 107.38 million bales estimated a month ago. Forecast production is reduced for India, Pakistan, China, Greece, Mali, and Mexico, based on current indications of northern hemisphere harvest results. India is estimated to see total production of around 28.50 million bales against 29 million bales and China 25 million bales compared to 25.30 million bales (Click Here For Full Report)
TOP STORIES THROUGH THE WEEK:
Lifting Of Ban On Textile Units In Rajasthan Hailed By SIMA
SIMA hailed National Green Tribunal (NGT’s) decision to lift ban on over 700 textile units in Rajasthan. NGT ordered closure of the units in May last for non-adherence to norms laid down by Pollution Control Board (PCB). The decision has come as a relief to textile industry in southern states too. Yarn prices have started improving by Rs 4-6 a kg.
CCI Begins MSP Operations, But On A Small Scale
CCI started procuring cotton from farmers at MSP across Andhra Pradesh, Telangana and Maharashtra. CCI requested Maharashtra farmers to bring saat-bara documents and bank pass book. Till 11th November, CCI procured around 4,000-5,000 quintals have been procured. CCI is facing criticism for not starting MSP operations in a full fledged manner. Chairman B.K. Mishra said cotton farmers are getting higher prices than MSP in Andhra Pradesh and Telangana. He said farmers here are getting Rs 50-100 more than MSP per quintal.
Cotton Prices Decline 8% In September
Cotton prices in September declined 8% on domestic and global demand concerns. Also, higher carry forward stock from last year disappointed prices. High moisture content in new crop added to the price woes. Experts suggest to watch exports demand, production and consumption estimates in India, China and USA, and movement in dollar.
Cyclonic Storm To Bring Heavy Rain Over TN, Puducherry
A deep depression over Tamil Nadu and Puducherry is likely to intensify into a cyclonic storm by 9th November, as per govt weather agency. Heavy rain predicted over north coastal Tamil Nadu and Puducherry. Rainfall forecast over south Tamil Nadu, Rayalseema, south coastal Andhra Pradesh, south Interior Karnataka and Kerala on 10th November.
Govt Approves Rs 1,540 Cr Drought Relief For Karnataka
Central govt approved Rs 1,540 crore drought relief for Karnataka. The state was the first to declare a drought in August. As per govt, Karnataka suffered a damage of Rs 14,471 crore in over 3.2 million hectares of crop area due to drought.
Cotton Farmers Getting Higher Prices Than MSP, Say CCI
Agency has started MSP operations in Andhra Pradesh, Telangana and Maharashtra, but in small scale. Till 11th November, CCI procured around 4,000-5,000 quintals. CCI is facing criticism for not starting MSP operations in a full fledged manner. Chairman B.K. Mishra said cotton farmers are getting higher prices than MSP in Andhra Pradesh and Telangana. He said farmers here are getting Rs 50-100 more than MSP per quintal.
China’s Oct Cotton Imports Down 48.6% YoY
China Imported 42,100 Tons Cotton In October, Down 48.6% Percent From Same Month Last Year, As Per Customs Data. October’s Cotton Import Of 42,100 Tons Is China’s Lowest In Atleast A Decade. Imports For First 10 Months As A Whole Reached 1.2 Million Tons, Down 64.3% Compared To Last Year.
Forward Deals By China
Few Indian ginners and exporters are to deliver some volume of 2015/16 cotton at China’s main port. S-6 1-5/32 cotton, S-6 1-1/8 in CIF quoted at 68.90 cents/pound and 67.90 cents/pound. Prices of S-6 1-5/32, S-6 1-1/8 for December-January shipment slipped 1.50 cents/lb.
Egypt Issues Subsidies For 2015/16 Cotton Crop
Govt of Egypt issued subsidies for 2015/16 cotton crop at LE 261.7 million ($33 million). Holding Company For Textile, Weaving and Spinning (HCTWS) will buy medium and short staple cotton grown in upper Egypt at LE 1,100 ($ 137.5) per qintar. Long and extra-long staple cotton grown in the Delta region will be purchased at LE 1,250 ($156) per qintar (or $32/bale). FAS Cairo projects a reduction in the MY2015/2016 crop by 40% to 315,000 bales. In 2015/16, exports from Egypt are seen at record low of 130,000 bales. Exports in 2014/15 are expected to reach 150,000 bales. consumption in 2015/16 is forecast to stay unchanged at 650,000 bales.
Cotton Use By Export-Based Spindles In Pakistan May Reduce To 8.5 Mln Bls
Cotton consumption by export-based spindles may reduce to 8.5 million bales from 14 million bales, APTMA. Export-dependent working capacities of spindles and looms have either been restricted to one shift operations or closed down because of the high cost of doing business. Rise in electricity tariff to Rs 15 per unit coupled with other impositions has enhanced cost of doing business.
CCAC Lowers Pakistan 2015/16 Cotton Crop Target
Cotton Crop Assessment Committee (CCAC) revised down Pakistan’s 2015/16 cotton target to 11.4 million bales against 15.49 million bales estimated earlier. The committee has downward revised the country’s cotton output target for the third time. Lowered production target is attributed to severe attack on cotton crop by pink bollworm and whitefly in Sindh and Punjab.
Pakistan May Import At Least 2.5 Mln Bales Cotton In 2015/16
Pakistan may import more cotton in 2015/16 season due to lower crop forecast in the country. The Cotton Crop Assessment Committee (CCAC) estimated production short by 4 million bales at 11.4 million bales this year against initial target of 15.4 million bales in February 2015. Industry officials expect Pakistan to import at least 2.5 million bales. Cotton crop in the country has been damaged due to floods. Floods damaged crops at an estimated area of 100,000 acres.
OUTLOOK FOR NEXT WEEK:
Commoditiescontrol.com projects cotton prices to slightly decline in the course of next week as new crop arrivals are expected to rise after continuous slow supply for most of this week. Also, prices of seed cotton are hovering at their lowest levels. Further, MSP procurement operations of CCI may pick-up as kapas prices are most likely to fall below the support price set by the government.
(By Commoditiescontrol Bureau; +91-22-40015532)
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