Export reopening hope keeps up cotton prices

Cotton prices remained high on Thursday due to the expected demand from exporters, who are waiting for fresh export registration to begin in the middle of next month. Shipments are expected from February 1. Prices may correct only once the export demand is met.

As the global market is also tight, with prices rising again in recent weeks, exporters are interested in tapping this demand.

Those who had got the registration earlier but could not export before the stipulated date of December 15 are understood to be holding on to nearly 1.5 million bales (a bale is 170 kg), anticipating that registration will reopen soon.

The price of the benchmark Shankar-6 variety in Gujarat is around Rs 42,000 per candy (356 kg).

The textile commissioner’s office has received confirmation for a little over 2.2 million bales for exports. It estimates that a little over three million bales have been exported. The confirmation to the commissioner has to be sent in 21 days and so the cutoff date will be January 5. The market expects the Directorate General of Foreign Trade to start fresh registration from February 1.

The government had earlier decided to permit exports up to 5.5 million bales and so the new registration will be for the balance 2.5 million bales. As noted, exporters have cornered half of that. The rest will have to be bought and ginners are holding on to stocks in anticipation.

“The export demand for cotton is good and still remunerative, going by prices in the overseas market,” said Mumbai-based Shirish Shah, partner, Bhaidas Cursondas & Company.

On the IntercontinentalExchange (better known as ICE, the American financial company that operates internet-based market places which trade futures and over-the-counter energy and commodity contracts, beside derivatives), cotton futures are being traded at a huge premium to the spot prices.

Traders there are importing cotton from countries like India and selling in futures. Market sources said multinational trading companies were also active in procuring cotton from here. Of the 5.5 million bales registered earlier, 600,000, or 11 per cent, exports were registered in the name of MNC traders.

However, once the export demand is fulfilled, “cotton prices might see some correction, as fresh arrivals are increasing and demand from yarn manufacturers has come down”, said Arun Dalal, an Ahmedabad-based cotton trader. Yet, he does not see prices going below Rs 40,000 per candy, unless the market abroad falls sharply, affecting exports.