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Cotton Range Bound in India But Demand Likely to Improve Near Term

Abhijeet Banerjee
Abhijeet Banerjee

Procurement continues which is preventing fall in prices currently. The cash crop, which has the highest cultivation in Maharashtra, is procured by Cotton Corporation of India (CCI) and its sub-agent Maharashtra State Cooperative Cotton Growers Marketing Federation Ltd.  Maharashtra Deputy Chief Minister Ajit Pawar has recently directed the CCI to complete entire process of cotton procurement from farmers before monsoon. To achieve this mammoth task, all procurement centres and APMCs, Krishi Kendras and related offices will have to compulsorily work even on weekly holidays, said Mr Pawar. According to the state cooperation department, which submitted the details of cotton production and procurement till end-May, of the total 410 lakh quintal cotton production for 2019-20, CCI and its sub-agent have procured 188.17 lakh quintal to date, while private traders have purchased 198 lakh quintal. 

While few traders expect further price depreciation but most are not of the same view – they see better prices in coming weeks. This is because the spinning units are not running at full capacity because of labor problems, due to the corona problem but within a month time, most traders and spinners expect situation will become normal as labor problems will reduce. In global exports front, offers in India are cheaper hence scope for export queries may pick up, as lockdown eases in most nations.  

As per trade sources nearly 60 lakh bales are still available with the farmers, and out of which approximately 20-25 lakh will be carried forward for the next season. Till date 38 Lakh of cotton has been exported and additional 5 Lakh export is expected, taking the export number to 43 lakh bales. As of now China's demand is good for Indian cotton. Demand for cotton yarn export is good as prices have increased from lower levels. Still demand of fabrics and garment is picking, although in near future there are expectations for improving demand for the same. Improving demand prospects would be pushing prices up as a result. Besides, CCI is not in mood to sell its stock at present lower rates. Reduced selling would mean lesser supply burden in the market hence favorable for rise in prices.  

 

Trade estimates also indicate that the inventory available with the mills can last for next 20-25 days only. All mills will be prompted to resume purchases after mid-June roughly. Besides, weakness in Indian Rupee also supporting a price rise as Indian cotton is lower in world market. There are estimations of nearly 10 lakh stock lying with with traders, Ginners, MNC and MCX warehouses. All India arrivals are reducing day by day, and after June 15th, cotton arrivals will drop further – enhancing the difficulty for the mills to source cotton. Kapas or Raw seed cotton lying with farmers has been sold out mostly last 30-50 days and balance stock lies only with large scale farmers who are not in a mood to sell right now, since they are not in need for money as of now. Increase in MSP of cotton is another reason for increasing possibility of price rise from current offers (which are running lower than the MSP at present) as it will force farmers to withhold selling at present. They can earn better prices October onwards when new season crops start arriving in mandis.  In all cotton prices in India may see firming prices in coming months under present scenario.  

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