Cotton price may touch Rs 38,000 per candy by July this year

Short supply and reduced stock position may push the commodity's price upwards

Short supply and reduced stock position may push cotton price up to Rs 38,000 per candy in India. Scarcity of quality cotton may also support the gain in cotton price.

Traders and exporters believes that the way price in the international market is increasing, export demand is likely to rise. Domestic mills are also witnessing surge in demand.

Price of cotton over the last fortnight has increased nearly Rs 2,000 to touch Rs 34,800-35,000 per candy (one candy is 356 kg). At the same time, arrival of cotton in market has decreased from 60,000 bales to 40,000 bales (a bales of 170 kg) in India. The current highest daily arrival was reported in Gujarat with nearly 20,000 bales a day.

"Tight supply and limited stock position of cotton may increase the price to Rs 38,000 per candy by end of July this year. Export from India has been slow so far but as US dollar becomes strong, shipment demand is likely to rise in the near future," said Arun Dalal, a leading cotton trader from Ahmedabad.

The Union government recently revised cotton production estimates to 39 million bales from 41 million bales for cotton year 2014-15 (October to September) while Cotton Association of India (CAI) has estimated the output at 39.1 million bales production. Traders expect cotton production to be around 38 million bales.

By the end of April, total arrival of cotton touched 33.5 million bales. Out of it, 4.5 million bales have been exported, and close to about 8.5 million bales has been procured by the Cotton Corporation of India with the rest being consumed by mills and others.

Total available stock for the next five months is estimated to be about eight million bales and possible requirement is expected to be around 9.6 million bales. Farmers hold nearly 4 to 4.5 million bales and they are not willing to sell it at low rate. Ginners and traders are holding nearly 2.8 million bales. Import will be about 700,000 bales.

A report on cotton by S Ajaykumar and Company said, "Strong farmers and supportive cotton seed rate has increased rate of raw cotton. Price of raw cotton will only increase as the remaining quantity of cotton is with farmers."

Price of raw cotton is presently ruling between Rs 900-925 per 20 kg and it may exceed Rs 1,000 in the coming two months if demand rises.

"If price of cotton in international market continues to increase, demand for shipments will rise from India. Under the current scenario, cotton export is expected to be about six million bales by the end of the season," said Dhiren Sheth, president, CAI.

Anand Popat, secretary, Saurashtra Ginners' Association (SGA) said, "CCI is having huge stock but it may not sell cotton in loss. Farmers are also not willing to sale in lower price. Overall sentiments favour rise in price."

Earlier in February this year, it was predicted that cotton cultivation in next kharif season may dip by 15 per cent due to low prices and poor demand. However, now the industry believes that sowing of cotton could be nearly the same as last year as price factor may change the mindset of farmers.