Cotton surges to peak in March on high demand, low arrivals

Cotton prices continued to surge touching Rs 40,000 per candy - highest level so far during this season on lower arrivals and increased demand from millers and exporters. Trader sources noted that reduced production estimate for the year 2012-13 has triggered bullish sentiment thereby strengthening the prices during past one month.

Cotton price trend has been upwards over the past one month. The prices have increased by about Rs 2,800 per candy from Rs 37,000-37,200 per candy at the beginning of this month. In the past one week alone, the prices went up by Rs 1,500 per candy.

Gujarat sankar-6 variety of cotton traded at Rs 39,700-40,000 per candy of 356 kg on Saturday. The prices, however, remained subdued on Monday at around Rs 39,500 to Rs 39,800 per candy.

According to traders, the sentiment was bullish at the beginning of the week on Monday.

"In comparison to demand, arrivals are less across the country. Also, a recent revised estimate of cotton production shows a decline in the crop. This is the main reason for price rise in cotton," said Anand Popat, secretary of Saurashtra Ginners Association.

The International Cotton Advisory Committee said, in the next financial year global production is estimated to drop 14 per cent to 22 million tonnes. According to Central Organization for Oil Industry & Trade (COOIT)'s revised production estimate, cotton production in India for the year 2012-13 will be around 33 million bales as against earlier estimate of 33.40 million bales.

Popat further maintained that multinational companies have been buying heavily over the last two months. "Multinational companies' traders in India have started buying cotton from the spot markets and they are selling domestic futures on the MCX or in international markets. They are also exporting the commodity directly," he added.

Currently daily arrivals are hovering around 92,000-95,000 bales (each of 170 kg) of cotton at the Indian markets. On Monday, the total arrivals were reported at 20,000 bales in Maharashtra, 9,000 bales in Madhya Pradesh and 35,000 bales in Gujarat.

"Indian mills do not have enough stock to fulfill the demand. Therefore they are piling up the stock to match the demand, which is likely to firm up in future. Also, export to China has increased this month," said Paritosh Agarwal, managing director of Suryalakshmi Cotton Mills Limited from Andhra Pradesh. "While demand has increased, but the arrivals have fallen as a result, prices of cotton have constantly gained during this month," he said.