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Market Panorama of Cotton markets; Farmers to get good returns this year

Abhijeet Banerjee
Abhijeet Banerjee
Cotton Crop

The business activity continues picking up across various global markets of cotton. Indian market situation is favorable as well.Prices are moving up gradually. Procurement from the CCI has progressed in Gujarat and Maharashtra satisfactorily giving the local farmers continuous opportunity to earn good profit for their produce.

Between July and November months, Indian cotton was fairly discounted than its nearest competitor i.e. the USA and this was bullish for Kapas as well as Cotton markets. A decent upside rally was noted during this period and from the June lows, cotton/Kapas prices in major markets of Gujarat are currently up 25-30% nearly.

The upward journey halted towards the later part of November since Indian export offers had turned expensive by that time, and to attract overseas buyers’ attention, the exporters began offering cotton with some discounts. Export deals are lesser these days. Indian prices have gone above global prices in recent weeks. Upside is capped therefore. Once prices turn competitive in the exports market then exports possibilities shall rise again.

Global demand and supply factors indicate that average prices in key markets may trend upwards. The latest U.S. Department of Agriculture (USDA) estimates indicate that world cotton production in 2020/21 is projected at 112.9 million bales—approximately 7.5 percent below 2019/20 and the lowest since 2016/17. The United States—accounting for more than half of this season’s decrease—remains the third largest producer, besides India and China.

The mill use for world cotton is projected at 115.7 million bales, nearly 13 percent above 2019/20 but below each of the preceding 3 years. The rebound in world mill use is supported by a global economy recovering from unprecedented shocks experienced in calendar year 2020.

Consequently, world cotton trade is also projected to rise, with 2020/21 global exports forecast to reach their highest in 8 years at 43.6 million bales. US may supply 35 percent of the global cotton demand total this season. Meanwhile, world cotton stocks in 2020/21 are projected to fall by 3 percent from last season to 96.3 million bales.

Moderately higher cotton prices are projected in 2020/21, supported by a lower global cotton stocks-to-use ratio as well as by rising competing commodity prices.

In context to India’s cotton market the CAI (Cotton Association of India) has estimated domestic consumption at 330 lakh bales, which indicates an increase of 80 lakh bales in cotton consumption for the cotton season 2020-21 from the previous year’s consumption estimate of 250 lakh bales.Production on the other hand is projected between 350-360 Lakh bales.

The CAI has estimated exports for the season at 54 lakh bales, which is higher by 4 lakh bales than that estimated for the previous cotton season. These aspects convey improving trade possibility in near future. On the other hand the carry-over stock at the end of the cotton season 2020-21 is expected nearly 93.50 lakh bales, as against 107.50 lakh bales at the end of the season 2019-20. Farmers in the country are expected to increase their returns in case they hold some of their produce for next 2-3 months at least.

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