Cotton prices jump 7% in Feb, as buyers eye price rise

Cotton prices have witnessed a rise of around seven per cent so far this month, thanks to increased stockpiling by foreign traders in anticipation of better price expectations. This has also triggered demand from domestic millers, who are expecting healthy yarn exports this year.

According to market sources, with arrivals starting to decline, prices are likely to firm up to Rs 38,000 a candy (356 kg). Prices are up from Rs 34,000-34,100 a candy on February 1 to Rs 36,500-36,800. Daily arrivals have fallen from 55,000 bales (170 kg) to 40,000-42,000 bales in Gujarat markets. Nationally, the arrivals have fallen from 215,000 bales to 175,000 bales a day.

"Cotton prices have firmed up over two-three weeks as foreign traders have increased their buying from here. Moreover, decline in arrivals and increased demand from millers are supporting the price rise," said Arvind Patel, director of Jaydeep Cotton Fibres.

Multinational trading companies active in India are said to be buying cotton in order to export it. Switzerland-based Glencore Grains, Netherland's Louis Dreyfus Commodities and Singapore-based Olam International are active in exporting cotton from India, as prices in the international markets have started improving. Sources say global companies have so far purchased about a million bales from India.

Since production is estimated to fall this year due to the weak monsoon, a supply shortage is feared at the end of the season. As a result, demand from international and domestic traders has been on the rise. The Cotton Advisory Board estimates 33 million bales of crop in 2012-13 compared to 35.5 million bales the previous year.