In continuation with the last report, things worked well as per expectations, start of 2020 was very active for the Indian market.
Demand for cotton picks up
Good to very good demand has been reported from exporters and mills on daily basis despite good number of cotton arrivals. This all happened due to Chinese demand for Indian cotton. India has sold good quantities to China for its prompt shipment and also few export sales were reported with guaranteed arrivals in China. Such good sales for prompt deliveries in short span of time gave a good reason to create a demand in market and market went up from a level of Rs 39200-39300 per candy ( Gujarat S-6, regular cotton) to Rs 41000 level in very short time.
ICE moves up supporting higher Indian prices
Apart from Indian price movement due to export demand, ICE kept moving up again supporting Indian prices. Stronger Indian currency (due to US-Iran stress) was the only one factor which put pressure on export costing, making export pricing uncompetitive some 10-15 days ago. With stronger rupee and higher Indian cotton prices again export demand slowed down, but still there is good demand for export shipments in the market.
ICE March contract moved from below 70s to above 70s and trading around 72 level, and continues its bullish momentum as prices already hit an eight-month high.
Supported with the optimistic outlook of signing of US-China phase one trade deal scheduled on 15th of January, speculators are building long position, and in case of positive action on trade deal, ICE can further move up and cross 73.
Last two latest consecutive US weekly export sales were lower in comparison to previous weekly sales, bullish sentiments and optimism for US-China trade deal ignored these reports and ICE moved up.
No major changes in WASDE
The World agriculture supply and demand estimates (WASDE) has released its latest estimates with no major changes, market absorbed it well and this report was read as neutral to bullish.
CCI strategies not known
Within India, in very active 15 days of January, the cotton market has picked up significantly, due to good demand and bullish sentiments. Markets reported that ginners have created stocks in view of Chinese demand and optimism for US-China phase one deal.
Seed cotton prices corrected to above MSP level in most of the cotton trading areas, so CCI did not have to buy cotton at MSP and most of the cotton is getting traded in the open market.
MCX cotton Jan and Feb contract reported with decent volume traded on it.
CCI is keeping good volume of cotton bales now. The market is trying to find out CCI’s possible selling strategies for the season, but there is no concrete information on when and at what price they will sell.
Market is worried that during off season with low availability of cotton (if any) in the market, CCI can rule the prices in the market.
With higher Indian cotton prices and stronger rupee, export demand would certainly slow down for some time. Chinese new year is also near by so buying activities from China can also be expected to slow down.
We have to see how cotton will be considered in the US- China phase one deal. This will be a major factor giving direction to the global cotton market. Meanwhile, US-Iran tensions can result in weaker/ stronger INR against USD.