Due to hoarding, spot market prices hit all-time high.
As cotton prices get corrected, farmers and stockists are holding residual stocks of the current year crop, anticipating that the global deficit in output this season may push the commodity to a newer height.
Cotton futures for delivery in April on the National Commodity & Derivatives Exchange (NCDEX) fell 2.4 per cent so far this month to trade at Rs 1,168.50 per 20 kg yesterday, as compared to Rs 1,197.80 per 20 kg in the beginning of this month. Due to hoarding, prices in the spot market have risen, to hit an all-time high of Rs 61,360 per candy (356 kg) on Wednesday, it is yet to reflect in the futures market.
M B Lal, a veteran Mumbai-based cotton trader, has estimated an inventory of nearly five million bales (a bale is 170 kg) with large farmers and stockists, equivalent to two months of mills consumption in India. A similar quantity has been is held over by ginners and textile mills for hedging the future price risk. Lal estimates the current all-time high prices in the physical market will not encourage farmers and stockists to release the entire quantity immediately. In anticipation of a further spurt, they may hold a reasonable amount for release in the lean June-September season, he said.
According to reliable sources, an estimated 25.8 million bales, 83 per cent of the total forecasted output of 31.2 million bales, had arrived into the market till on Wednesday, as compared to 25.1 million bales, 76 per cent of the last season’s output of 33.9 million bales that hit the mandis around the same time last year. This means an estimated 5.3 million bales, 17 per cent of the year’s output, is left with farmers and stockists.
A trader said the existing stock was enough to run mills until May. After that, textile mills will have to come forward to buy cotton at higher prices. Farmers are awaiting that, he said. Since the government has allowed tax-free import of cotton, many mills may prefer import of quality cotton as well, he added.
In India, the price of the benchmark Shankar-6 variety rose by Rs 300 to touch a fresh high of Rs 60,200 per candy yesterday. US cotton futures for delivery in May on the International Cotton Exchange, in contrast, which rose to a record high of $2.27 per lb last month, were lower by 0.16 cents at $1. 9735 per lb.