Agri Business

Cotton remains under pressure as coronavirus scare disrupts trade

Rutam Vora Ahmedabad | Updated on March 06, 2020 Published on March 06, 2020

Cotton prices have corrected by about 8-10 per cent in the past one month   -  THE HINDU

Weak demand and high output drive prices down

Weak overseas demand and continued trade disruptions caused by the coronavirus scare are putting pressure on cotton prices in the international and domestic markets.

Trade insiders believe that the global factors coupled with increased arrivals in the domestic markets will put more pressure on prices, which have already corrected by about 8-10 per cent in the past one month to touch ₹38,500 a candy (each of 356 kg of ginned cotton of 29 mm variety).

Crop outlook

Notably, international cotton futures have corrected from 70.69 cents for ICE May contract on January 29, to 62.43 cents on March 6, indicating a fall of about 12 per cent.

The Cotton Association of India (CAI), the apex trade body, on Friday retained its crop outlook at 354.5 lakh bales (each of 170 kg) for 2019-20.

Arun Sekhsaria, Managing Director of DD Cotton, which is a leading cotton exporter, told BusinessLine that from a trade point of view, coronavirus has caused some dent in the business. “Travelling (overseas) has come to a standstill due to the virus scare. Without mobility, it is difficult to make shipments. Secondly, there are hardly any buyers in the overseas markets, except Bangladesh. So, not much buying is happening at international level. In addition to that, yarn sales are not moving, while garment trade has also taken a hit.”

Market arrivals

On the other hand, daily arrivals in the domestic market have peaked and now started tapering off from earlier 2.4 lakh bales per day till last month to about 1.3-1.4 lakh bales per day now.

As per the CAI data, cotton arrivals during the months of October 2019 to February 2020 are estimated at 254.43 lakh bales, which was 213.42 lakh bales last year around the same time. This means roughly about 100 lakh bales are yet to arrive to the markets, which traders expect to happen by the end of March or early April.

Meanwhile, the Cotton Corporation of India (CCI) is learnt to have continued its purchases from the farmers, to support them from falling raw cotton prices. CCI has already bought about 75 lakh bales so far for the year, Bloomberg reported on Friday. “This is a beneficial proposition for farmers as they get about ₹500-700 more from the private trade. So we are seeing huge quantities being brought by farmers,” Sekhsaria said.

However, an Ahmedabad-based cotton exporter maintained that while the global cotton outlook remains bleak, Indian cotton has good prospects in Vietnam, Turkey and Far Eastern Countries besides Bangladesh. "Indian cotton market is not much affected due to coronavirus. The domestic cotton prices have not fallen as sharply as ICE Futures because there are other markets available to India that can be explored," added the official.

Published on March 06, 2020

A letter from the Editor

Dear Readers,

The coronavirus crisis has changed the world completely in the last few months. All of us have been locked into our homes, economic activity has come to a near standstill. Everyone has been impacted.

Including your favourite business and financial newspaper. Our printing and distribution chains have been severely disrupted across the country, leaving readers without access to newspapers. Newspaper delivery agents have also been unable to service their customers because of multiple restrictions.

In these difficult times, we, at BusinessLine have been working continuously every day so that you are informed about all the developments – whether on the pandemic, on policy responses, or the impact on the world of business and finance. Our team has been working round the clock to keep track of developments so that you – the reader – gets accurate information and actionable insights so that you can protect your jobs, businesses, finances and investments.

We are trying our best to ensure the newspaper reaches your hands every day. We have also ensured that even if your paper is not delivered, you can access BusinessLine in the e-paper format – just as it appears in print. Our website and apps too, are updated every minute, so that you can access the information you want anywhere, anytime.

But all this comes at a heavy cost. As you are aware, the lockdowns have wiped out almost all our entire revenue stream. Sustaining our quality journalism has become extremely challenging. That we have managed so far is thanks to your support. I thank all our subscribers – print and digital – for your support.

I appeal to all or readers to help us navigate these challenging times and help sustain one of the truly independent and credible voices in the world of Indian journalism. Doing so is easy. You can help us enormously simply by subscribing to our digital or e-paper editions. We offer several affordable subscription plans for our website, which includes Portfolio, our investment advisory section that offers rich investment advice from our highly qualified, in-house Research Bureau, the only such team in the Indian newspaper industry.

A little help from you can make a huge difference to the cause of quality journalism!

Support Quality Journalism
This article is closed for comments.
Please Email the Editor
You have read 1 out of 3 free articles for this week. For full access, please subscribe and get unlimited access to all sections.