Indian cotton prices were well influenced with cotton fundamentals – prices reported stable to easy with regular demand from local mills, exporters and merchants. Arrivals are improving day by day, average daily arrival was reported at approximately 130,000 bales during the last week.
Quality concerns continue
Quality concerns continue in the market, but with time, share of good quality cotton with lower moisture has increased in daily arrivals and same should continue. Trade sources indicate initial arrivals of seed cotton having high moisture levels leading to discounting, and limited interest from trade as well as government procurement agencies. As of now another concern is of high micronaire. Especially in Saurashtra region of Gujarat it’s reported at approximately 4.5-5.3 level depending on quality & price, which is generally found at level of 3.5-4.9 (G-5) in regular seasons.
CCI gets active in the market
CCI buying has been reported from few centres in Gujarat, following buying in northern and southern India. Once daily arrival crosses 1.50 lakhs + bales per day with better quality and lower moisture, and if export demand does not pick up, CCI can start buying cotton aggressively. This is the market expectation which can lend support to cotton prices and cotton can trade at and above MSP price. In anticipation of this scenario, traders continue to buy best quality cotton out of daily arrivals, as current prices are trading below MSP. With CCI and export demand we should keep watch on few more factors like currency movement, US China trade talk, US weekly sales development , improvement of cotton quality within India, holding capacity of farmers in view of confidence from government to buy cotton at MSP, demand of Indian cotton specially in Bangladesh and China, India-Pakistan trade possibilities, etc – change in any of these factors can impact Indian cotton prices.
With so many uncertain and unpredictable factors, market should trade slow and steady.
USDA reduces Indian cotton consumption
The latest report of United States Department of Agriculture (USDA) estimates Indian cotton consumption for marketing year 2019/20 at 24.6 million 480-lb. bales (31.5 million 170-kilogram bales/ 5.4 MMT), 150,000 480-lb. bales lower than official USDA estimate. Mills continue to stock limited cotton and maintain lean inventories. The trend is expected to continue for the new season due to price uncertainty. The wholesale seed cotton market prices continue to show a declining trend in major cotton growing states. Despite the biggest US weekly sales of 345,100 US running bales for the current season followed by second highest weekly sales of 227,600 US running bales, ICE did not react much except range bound volatility with weaker tone. This weekend ICE March contract closed at 64.85 level – below 65 again indicating weaker note.