The Hindu Business Line : Cotton may fall on new arrivals, weak yarn

COTTON prices are expected to fall further in the next few days on reports of fresh arrivals of new crop, weak yarn market and limited buying interest by cotton mills.

Cotton spot prices of select grades such as J-34 and Shankar-4 have declined by around Rs 400-500 per candy (355.62 kg each) in the last one-month following lack of mills' buying on expectation of good new crop and weak cotton yarn prices.

Forward delivery prices of cotton at the Multi-Commodity Exchange (MCX) have declined by almost Rs 1,000 per candy for long staple grade (28 mm length), since July 29 — first day of launch. November 2004 contracts at MCX were down Rs 1,000 at Rs 20,100 per candy on Friday as against Rs 21,200 per candy on July 29.

Daily arrivals of new crop from the northern region, Madhya Pradesh and Gujarat are reported around 10,000 bales ( of 170 kg) including Gujarat 4,000 bales (S-4 and 6), north combine (Punjab, Haryana and Rajasthan) 5,000 bales (J-34), and Madhya Pradesh/Maharashtra 2,000 bales. Karnataka coastal area DCH-32 arrivals will start by end October.

However, Mysore DCH-32 had already started but the present arrival of kapas is full of moisture. MCU-5 arrivals from Andhra Pradesh are expected to start by mid-October.

Cotton crop in Karnataka and Andhra Pradesh looks excellent, both quantity and quality wise. New cotton prices are 8-10 per cent cheaper than old cotton. Punjab/Haryana/Rajasthan J-34 and Gujarat S-6 forward transactions are picking up.

"Looking at current pace, fresh inflows will touch nearly 2 lakh bales so September, before the start of new season. Fresh arrivals are expected to pick up from the second week of October," a local trader said. Physical stocks with traders, merchants and ginners are reported to be around 2 lakh bales.

"Domestic prices of spot and futures may go down in anticipation of higher inflows and restricted buying by mills. There are reports of little moisture in the new kapas but the quality is good. Cotton November contracts are likely to go down further, say by Rs 500 per candy in the next few days," Mr Bhavik Mehta, Director of Soham Cotton Trading Company, told Business Line.

Yarn prices fell by nearly 10 per cent. Yarn off take is also low. On the other hand, most of the cotton mills have covered their stocks, till October-end.

Indian cotton prices are ruling higher than foreign cotton. Foreign cotton is on a bull run, anticipating China's entry in the market in big way as the Chinese crop has been damaged by 15 per cent t0 20 per cent by the recent floods.