Cotton futures on firm note, may come under pressure as fresh supply begins

Our Bureau Mumbai | Updated on August 22, 2019

Cotton futures in domestic market continued their gaining streak on Wednesday for sixth straight session. Cotton August future at MCX gained by 0.4 per cent on Wednesday to settle at Rs 21,270 a bale.

Limited supply in key cotton growing states, especially in the southern region, has been a concern since last few weeks amid lean supply season. Moreover, transportation hiccups during heavy rains have also created scarcity of cotton in the physical market.

Cotton supply across the country has more than halved between August 1-15 to 9,570 tons. Cotton futures at MCX have rallied persistently since first week of August.

Further, reports of pink bollworm attack breaching economic threshold in Maharashtra (majorly in Akola, Parbhani, Nanded and Yavatmal) has also added to positive sentiments.

New crop arrivals will start in next one month. The cotton inventory at industry level has been lower due to lower crop last year.

However, Kotak Securities Commodity Research believe cotton next month contract will retreat from higher levels as limited demand from overseas market and trade spat between US and China will keep cotton prices in domestic market under check in coming weeks.

Indian cotton yarn exports have declined considerably by over 40 per cent in the month of May and June. Despite limited supply, weak cues in global market and new crop arrivals by next month will keep cotton prices under pressure for near future.

On global front, after two sessions of weakness, ICE cotton futures again rebounded by 1.4 per cent on Wednesday to reach marginally below 60 cents/ pound levels. Euphoria over weather condition in Texas has been overshadowed by over-supply situation across the globe. A little pull-back could be seen today at ICE, but new crop arrivals season in U.S as well as China will keep Cotton prices under pressure in the near future.

Published on August 22, 2019

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