Cotton prices fall further by 3% amid sluggish demand

The commodity is ruling at Rs 33,200-33,500 per candy against Rs 34,500 a week ago

With demand from domestic mills continuing to be sluggish, cotton prices have fallen by about Rs 1,000 or about 3% per candy of 355 kg to last one week.  According to industry sources, prices have also declined owing to marginal export demand. 

Cotton traders say that prices may further decline by another Rs 500 per candy in near future.

After the fall, cotton prices are currently ruling at Rs 33,200-33,500 per candy as against the previous Rs 34,500 a week ago. Kapas or raw cotton prices too moved down by around 6% to Rs 880-920 per 20 kg during last one week. Raw cotton from farms, measured usually in 20 kg, is processed by ginning mills to produce finished cotton, usually measured in candy, which is then used by textile mills.

“Foreign futures tumbled to a one year low because of sluggish international demand that ultimately affected the domestic demand and therefore, prices declined. Moreover, domestic mills are buying only as per their requirements which may pressurize cotton price more in coming days”, said Anand Popat, managing director of Jalaram Cotton and Proteins Limited.

According to Popat looking at the current market scenario, cotton prices may fall further to below Rs 33,000 per candy in near future and are likely to go down to Rs 32,500 a candy by end of February.

Cotton futures tumbled to a one-year low after US officials reduced expectations for this season's decline in world stocks, citing "sluggish demand" in China, whose imports will fall to their weakest in 13 years.

New York-traded cotton, for March delivery, dropped 2.3% at one point to hit 58.25 cents a pound, the weakest level for a spot contract since January last year. Market expert said that, expectations of weak demand in China lead to the downfall in global market.

“US prices have traded in a tight range for much of the past 1-1/2 years amid uncertainty about China's plans to release its massive cotton stockpile”, said Ajay Kumar Kedia of Kedia Commodity Comtrade Private Limited.

Arun Dalal, an Ahmedabad-based cotton trader said, “In recent times, farmers, who had earlier held on to cotton inventory, began selling as they now believe that cotton prices will not move up further. On the other hand domestic mills are not buying in a bulk which has eventually put a pressure on the commodity's prices."

About 130,000-135,000 bales (170 kg each) of cotton arrive every day across India.

Meanwhile Cotton Advisory Board (CAB) estimates cotton production at around 33 million bales for the October 2015-September 2016 crop year against 38 million bales in the previous year. According to senior government officials, India is likely to harvest 35.2 million bales in the 2015/16 season, down 3.6% from an earlier estimate.