Cotton prices may firm up on dull sowing, strong demand

Amid slow pace of cotton sowing during the ongoing kharif sowing season (May-August) and firm demand from domestic buyers, cotton prices are likely to surge by about 10-15 per cent over next two months, cotton experts claimed.

Cotton prices are currently ruling in the range of Rs 37,500-Rs 38,000 per candy (each weighing 356 kg), which is likely to rise due to firm demand and weak sowing scenario. Cotton sowing has dropped at some of the key cotton growing regions in western and northern parts of the country including Gujarat, Maharashtra, Rajasthan and Punjab thereby hampering crop prospects in the next cotton year (October-September).

The cotton prices have witnessed a sharp surge in the past one week, rising from Rs 34,500 per candy on July 12, 2012 to Rs 37,500 per candy on Saturday.

"Cotton sowing has been delayed in Gujarat and the acreage has also dropped compared to last year. Also, we see increased demand from domestic millers especially from the southern states. This may escalate prices to close to Rs 40,000 per candy over the next one month," said Arun Dalal, a leading cotton trader and exporter in Ahmedabad.

According to state agriculture department sources, cotton sowing has been done on about 1 million hectares so far during the current kharif season, down by around 10 per cent against the same period last year. Overall total cotton sowing was made on about 2.6 million hectares in the state last year.

Also, industry estimates suggest already close to 13.5 million bales of cotton has been exported so far, leaving less carryover stock of the fibre commodity for the next cotton year. The exports are more than the earlier estimate of about 11 million bales.

"There will be lesser carryover stock due to record exports this year. Also, yarn exports are picking up, which has increased cotton buying from domestic millers," said Bharat Wala, president, Saurashtra Ginning Association (SGA).

Recently, the union ministry of agriculture had revealed that cotton sowing was down by 200,000 hectares across the country at the beginning of the kharif season this year.

Traders rule out any possibility of exorbitant increase in cotton prices despite acreage being low. "Cotton prices may rise this year, but not as much as we saw during 2011, when it touched Rs 61,000 per candy. Export demand has turned weak and we do not see significant fall in the production despite a drop in acreage this year. This may keep prices in check," added Dalal.