Cotton Prices Continue To Remain Strong

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India's local cotton prices remained healthy throughout the first half of March. While the fiber prices fluctuated within a very narrow range, overall prices remained strong across the country. The demand for the fiber is good as both the local spinning mills and traders are buying the fiber based on availability.

Also, demand from the overseas markets seems to be healthy. It is learnt that farmers are still holding sizable volume of cotton and they have expectations of even higher prices as the season progresses. Though more than half of the harvested crop has arrived, experts believe that farmers are holding sizable crop which is resulting in limited supply and stronger prices.

The total cotton arrival in the country till date is estimated to be around 21 million bales and current arrival is estimated to be between 180,000- 190,000 bales per day across India. On the price front, current domestic price of benchmark Shankar-6 variety was recorded at around Rs. 42,800 per candy (355.6kg, on 14th March 2017) which is lower by Rs 200 per candy compared to the end February price.

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On the global front, cotton prices continued with the fluctuation and prices gained upward momentum during the first half of March. The benchmark A index moved well above 85 cents mark and looks strong. Better export data, tight supply of the fiber in India and higher bidding price for the fiber in the auction of Chinese state reserve has provided impetus to price.

However, experts have pointed out that supply scenario is very well placed and stock outside China is more than adequate. Therefore, the price volatility would not sustain longer and cotton price may decline to a more reasonable level. The key data on the crop from USDA's latest forecast indicates that world cotton production to be 105.7 million bales up from the earlier estimates to 104.4 million bales (of 480 lb, last season's production was 96.7 million bales).

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Consumption estimates increased to 112.4 million bales from earlier forecast and ending stock revised upward to 90.5 million bales from earlier figure of 89.9 million bales. Beginning of March first fortnight, 'A' index started moving upward but later marginally declined towards the second week and recorded at 86.45 US Cents on 13th March (compared to 85.65 on 13th February 2017). To look at the trend, 'A' Index was at 78.55 US Cents in December 2016 end and was at 69.55 US cents per pound in December 2015 end.

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On the yarn front, cotton yarn prices remained nearly steady during the fortnight. Yarn exporters have tried to hike prices with the increase in cotton prices and US Dollar value. Also, demands for cotton yarn seems to have revived and more enquires were available in the market, especially from China.

Cotlook 'A' Index:  86.45 (As on 13th March 2017)

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