Cotton futures bullish on good demand

Domestic cotton futures are seen bullish next week due to good demand and shrinking arrivals, traders and analysts said today.

International futures prices are seen range-bound on pressure on prices due to availability of the commodity and drop in the crop's acreage in the new season, analysts said. "Cotton futures would be firm next week due to good domestic demand," an analyst said.

All India arrivals reached 30,000 bales a day this week, down 10,000 from last Wednesday. "Good demand and exports from the country will keep the market bullish in the week ahead," he said.

In the last one week, Kapas futures prices reached Rs 484.40 per 20 kg in the April contract, up Rs 6.20 on the National Commodities and Derivatives Exchange.

"Cotton arrivals are tapering, which has given extra bullishness to the market," the analyst said.

However, in the spot market, long staple cotton (28mm, Shanker6-Gondal) opened flat at Rs 19,400 a candy (1 candy=356 kg) from last Wednesday's close.

"Correction has been observed in the spot cotton prices in the last two days but prices will remain firm in the week ahead due to good domestic consumption," the analyst said.

Analysts see a range-bound scenario for cotton in overseas futures markets due to plenty of cotton available in the market.

"Exports from the US to China are low, coupled with plenty of cotton availability in the market, thereby exerting pressure on prices," an analyst said.

Data released by the United State Department of Agriculture has shown a drop in cotton acreage in the December 2007 crop, the analyst said.

"Cotton is losing out to other crops in the US in the new season, which may lead to cotton prices moving in a range," the analyst said.

May contract on the New York Board of Trade closed at 53.05 cents a pound on Tuesday, down 0.19 cents against last week.

Meanwhile, the total cotton arrivals in Gujarat for the 2006-07 (June-April) cotton season will not cross the 8.5 million bales mark, Manubhai Shah, director, East India Cotton Association, said.

"Till date, Gujarat has received 8 million bales and is expected to move towards, but not beyond, the 8.5 million bales mark by the month-end, which also coincides with the end of the cotton season in the state," Shah said.

In the 2006 crop season, the state received a total of 9.3 million bales, while this year's estimated arrival is seen down by at least 8 lakh bales.

"At the most, there would be a margin of 1-2 lakh bales either on the upper side or lower side of total arrivals," he said. The state is receiving 12,000-15,000 bales a day, he said, adding that arrivals are thinning by the day.

"Saurashtra has fared well this time and a large number of cotton arrivals have been received from that region this season," Shah said.