Cotton prices are steadily moving up even as about 70% of the estimated crop have already arrived in the market. Since early March, prices have strengthened by Rs 3,000 a candy (of 356 kg each) to Rs 44,500 now.
According to the Cotton Corporation of India (CCI) estimates, about 235 lakh bales (of 170 kg each) cotton have arrived in the market as on March 15. The Cotton Association of India (CAI) in its March 2019 estimate has pegged the crop this year at 328 lakh bales. According to market sources, the CCI initially conducted MSP procurement operations to arrest a fall in prices due to increased arrivals.
However, after buying about 12 lakh bales, CCI has reportedly stopped procurement as the market price of raw cotton or kapas gained 10% above the minimum support price (MSP) at Rs 5,850-5,900 a quintal. The MSP for cotton was fixed at Rs 5,450 a quintal. An increase in the price of raw cotton is likely to reflect in the ginned cotton and the prices may gain momentum from the current Rs 44,500 a candy.
“Cotton prices have gained sharply within a two-week time. Amid lower crop estimate, ginners suddenly panicked about a possible sharp rally in prices. This, coupled with a drastic decline in arrivals, created a bullish sentiment,” said Atul Ganatra, President, CAI.
Daily arrivals have declined to about 80,000-90,000 bales as against what used to be at 1.3 lakh bales last year. Nearly 90 lakh bales of the fibre is lying in stocks, of which mills have about 45 lakh bales, while the remaining is with corporates, CCI, ginners and MCX.
Exports, however, have slowed down due to increasing prices. According to trader sources, so far about 38 lakh bales have been exported, while the CAI estimates put shipments at 50 lakh bales for the season ending September 2019. “Due to higher prices, export contracts have taken a halt. But we believe that our target of 50 lakh bales will be achieved with China and Bangladesh as key destinations,” said Ganatra.
So far, Bangladesh has imported about 10 lakh bales, followed by China at 8 lakh bales and Pakistan at about 6 lakh bales. Vietnam and Indonesia are other important destinations for the Indian cotton. The international prices, however, quoted at 76.92 cents per pound for May ICE futures, while in cash segment, cotton prices quoted at 72.08 cents per pound.
As against CAI’s import projections of 27 lakh bales for the year 2018-19, so far about 5.5 lakh bales have been imported, while by March-end the imports may cross 7 lakh bales.