Slack demand both from exporters and domestic mills amid improving cotton arrivals will keep prices in a small range, exporters and traders said.

Prices may move down slightly from current levels but would mostly hover around Rs 35,000 a candy (of 356 kg each), said Mr K.N. Viswanathan, Vice-President, Indian Cotton Federation, formerly known as South India Cotton Association.

Chinese deal

The recent news that China has signed a $500-million deal for importing cotton from the US may not augur well for India, he said.

“China recently took a delegation to the US and signed a bulk deal on February 17 for $500 million-worth cotton. This could impact demand for Indian cotton,” Mr Viswanathan said.

China is a major buyer of Indian cotton.

The Cotton Advisory Board in its January meeting had revised upwards estimates for country's exports to 84 lakh bales (of 170 kg each) from its previous projection of 80 lakh bales. Up until January 24, the country had exported 44 lakh bales and a substantial portion was to China.

Quality issues are also impacting export demand, said Mr Shirish Shah, Partner, BhaidasCursondas, a trading company. According to him, there are reports of cotton being held back in a couple of ports due to quality issues.

Also, worldwide demand for cotton is low as mills have suffered huge losses due to sharply volatile prices in 2011.

Glencore International, a global commodities trading company, recently said it was impacted by the volatile price movements of cotton in 2011.

Benchmark cotton futures had touched historic highs of $2.27 a pound on ICE in March 2011. In India, benchmark Sankar-6 rose to a high of Rs 67,000 a candy at the same time. Subsequently prices moved by 50 per cent hurting exporters, mills and traders worldwide.

In India, cotton arrivals that were lagging behind the previous year in the earlier part of the season have now nearly caught up except in Maharashtra. Cotton arrivals until February 20 were at 213.4 lakh bales compared with 224.6 lakh bales for the same period last season. Cotton season runs from October to September.

Lower arrivals

In Maharashtra, the second leading producer of the commodity, arrivals were at 43.7 lakh bales against 57.3 lakh bales in the same period last season.

Apart from the fact that Maharashtra's cotton crop was impacted by bad weather leading to lower crop another reason pointed out was that some amount of cotton from the State goes to Gujarat, which has a large number of ginning mills.

Gujarat is the country's leading producer of cotton. The market is largely expected to be range bound with a negative bias, Mr M.B. Lal, Managing Director, Shail Exports, said.

But as mills' inventories are down they could come in to buy thereby support cotton prices, he said.

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