Cotton price rally may continue on tight supply

Traders and ginners says farmers want cash rather than cheques

Cotton prices may touch Rs 43,000 per candy (a candy of 355 kg) by end of January on account of short supply and improved exports as well as demand from domestic mills. The commodity prices have already gone over 10% to Rs 41,500-42,000 a candy in past two weeks.

According to the industry, daily arrival of cotton, which should have been more than 225,000 bales (a bale of 170 Kg), is about 150,000 bales. Everyone is trying to meet their export shipment deadlines and domestic demand and prices remain firm. Traders and ginners said that farmers want cash rather than cheques and that's why they are holding the crop.

"Cotton prices have gone up due to short arrival and good demand from domestic mills and exporters. It may continue to increase further as there is no hope for rise in supply in near future and pipeline is still dry. Farmers are not aggressive to bring raw cotton or kapas in the mandis across India due to cash shortage," said Bhagwan Bansal, president, Punjab Cotton Ginners Association.

Kapas prices are ruling in a range of Rs 1,100-1,160 per 20 kg.

According to Bansal, cotton prices may go up to Rs 43,000 per candy in the next one month if supply doesn't improve.

Exporters have no choice but to buy at any cost as they have to fulfil the prior commitments. According to the exporters, they have not made forward contract for February and March in this season, because of the constant rise in the cotton prices.

"Before October last year, several exporters have booked the orders for November and December but as arrival is not sufficient, exporters have to buy at any price. Though, looking to the current supply scenario, exporters are not booking new orders for February and March," said Arvind Pan, managing director, Jaydeep Cotton fibers Limited.

However, according to some industry persons, some correction is possible at the current price level. Yarn mills have already started buying according to their requirement and avoid bulk buying.

J Thulasidharan, president of Indian Cotton Federation, "Domestic mills want to buy but not at this price level. Currently, demand from yarn mills is as per requirement. Further improvement in cotton price may reduce demand. Prices should go down from current level otherwise overall demand may get affected."