Cotton to stay firm as crop arrival delayed

NEW DELHI: Cotton prices are expected to remain firm in the long term with traders expecting export demand to pick up. Current delays in the arrival of crop in Gujarat and Rajasthan mandis may also support the prices.

Analysts expect prices to move from the current Rs 22,300 per bale of 170 kg each to Rs 23,000 per bale in October. Increased demand from China, Bangladesh and Vietnam and the opening up of the Pakistan market for Indian cotton could firm up prices further, traders said. “The demand for cotton by local spinners and exporters will pick up by October 15. Apart from China, Bangladesh and Vietnam, we expect orders from Pakistan. The Pakistan government is expected to lift import duty of 5 per cent by next week,” says Atul Ganatra, president of the Cotton Association of India. They will come out with figures on export and domestic demand on Nov 1, he said.

Traders expect cotton production in 2018 to fall 4.7 per cent from the previous season to 34.8 million bales due to lower rainfall in key cotton growing states and attack of pink bollworms. This will also support cotton prices, they said. The country exported 6.9 million bales in 2017-18 marketing year that ended on September 30, he added.

The weak rupee will further aid exports, making Indian cotton cheaper for overseas buyers, exporters said. “This will ensure that farmers who sell quality cotton get a good price,” they said.

With closing stocks of less than 2 million tonnes, mills are demanding quality cotton, said Anand Popat of Kotyan Trade. “Current arrivals at 70,000 bales across the country are 50 per cent lesser than the previous year. If demand picks up and if arrivals continue to be less, then prices are bound to rise by Rs 500 a quintal,” says Popat. He said farmers were getting Rs 5,500-5,800 per quintal, which is more than the MSP. High quality Shankar 6 cotton variety was being quoted at Rs 46,000 per bale, he said.

Analysts say investors willing to buy cotton should wait for a dip till the Rs 21,500 levels which will happen once arrivals pick up. “In October, we expect prices to touch Rs 23,000 per bale as demand peaks,” said Anuj Gupta, deputy vicepresident of commodity research, Angel Commodity.