Cotton prices rise on CCI procurement, lower yield estimates

Improvement in international prices has also made exports viable

Cotton prices have started rising in the past couple of months, helped by Cotton Corporation of India (CCI)’s procurement of a fifth of the total crop, and lower yield estimates.

Prices have increased eight per cent in India. On the Multi Commodities Exchange (MCX), cotton was trading at Rs 15,020 a bale (of 170 kg) compared to Rs 13,990 on 23 January, 2015. On the US exchanges too, cotton prices have gone up by 9.4 per cent in the same period.

Prerana Desai, head of research, Edelweiss Commodities, said, “With the improvement in international prices, exports from India have now turned viable and some exports have resumed after a lull. Normally exports peak during December-January, which is a peak arrival season. Even buying by CCI from the open market has reduced floating stock significantly.”

CCI has so far procured more than eight million bales, which is 20 per cent of the total crop expected for the cotton year (October-September) 2014-15.

Lower production estimates at 39.4 million bales from over 40 million bales previously, due to fall in yields, has also pushed prices higher from the multi-year lows seen in January-end. Yield has been impacted in major crop growing areas like Gujarat, Maharashtra and Andhra Pradesh.

Exports have also resumed, with 3.2 million bales already estimated to have exported so far. Around 7.7 million bales were exported last year during the same period. Cotton Advisory Board expects cotton exports to stand at nine million bales. However, the industry expects it to be lower at 7.5 million bales.  

“There has been a strong demand, which has come in from other countries like Pakistan and Bangladesh but they don’t make up for the demand which comes from China,” said Sirish Shah, a Mumbai-based cotton exporter.

“With 20 per cent of the crop with CCI and exports starting to look good, to meet domestic demand CCI will have to sell average 7 lakh bales per month till September,” added Desai.

This is as consumption has increased. For the quarter ended December, consumption was up 3%.