MUMBAI (Commoditiescontrol) - The spread between S6 (29mm or 3.4-4 mic) and furdar (22-26mm) widened to record level this season due to tight availability of quality cotton followed by ample supply of furdar quality. The spread between the two on May 5 rose to historic high level of Rs 9,200/candy (356 kg each) against Rs 3,000 same period year ago.
The inferior quality lint (short staple length) also marketed as the furdar grade variety usually arrives during the month of February (third-fourth picking). Historically, the average price spread gap between furdar grade and superior grade stock ranged between Rs 2,000-3,500/candy. It is widely used in textiles for the of low count yarn.
The average spread between S6 and furdar variety during March 1 to May 10, 2017 this year was recorded nearly Rs 6,000/candy versus Rs 2,825 corresponding period previous year.
The spread between these two quality has widened this year mainly due to higher supply of furdar variety against tight availability of S6 quality. The low count (furdar) quality production rose this season due to poor rainfall during third and fourth picking.
The country is estimated to produce 340.50 lakh bales (170kg each) cotton during the ongoing cotton season, slightly higher from 337.75 lakh bales in 2015-16, according to Cotton Association of India (CIA).
According to the data compiled by commoditiescontrol.com S6 (29mm or 3.4-4 mic) dropped 0.68% so far since March 10, 2017, whereas furdar quality tumbled 6.41%.
Surprisingly in the past few weeks, renewed demand, from some domestic mills and majorly from MNCs dealing in export business, for furdar quality stock has limited the downfall in prices. The furdar quality lint is used to spin 2s-16s yarn counts which is then produced into finished denim products by the textile mills.
The difference between the these two quality historically ranged between Rs 2000-3500/candy and thus it is likely to adjust themselves according to law of average sooner or later.
Conclusion:-
In order to adjust the spread to normal average level it seems that S6 quality cotton will fall more than furdar going forward. The availability of fine quality cotton likely to increase ahead due to imports. The country is likely to receive fine quality cotton from Australia and then from US from July. But the availability of furdar variety is limited and the new supply of such quality is expected only by February next year 2018 and this may support any sharp fall in this quality cotton.
However, the country is likely to receive fine quality from overseas and prospects of better crop this season amid expectations of rise in acreage due to better rates, the fine quality cotton may witness some selling pressure. Further MNC's are also holding fine quality with anticipation of better return and their selling pressure also likely to weigh on prices.
The spread between S6 and further has shrinked to Rs 7,200/candy (see the above chart) in less than last couple of weeks from record level of Rs 9,200 on May 5. The furdar quality cotton rose 7.35% this week, whereas S6 quality gained only 1.35% is an evident that spread is going to narrow down ahead.
(By Commoditiescontrol Bureau; +91-22-40015533)