Cotton prices to weaken further on low demand

There seems to be no respite from the falling prices of cotton. The prices are likely to fall further by another Rs 500-1,000 a candy (1 candy = 356 kg) within a month. The decline in international prices and poor demand from local mills are pulling down cotton prices across the country.

The last two weeks have seen cotton prices declining by of Rs 300-700 a candy. Market experts said during the last week of March and first week of April, the domestic prices surged unexpectedly. "But now that the international prices are down, the impact is being felt on the domestic front," they said.

"Mills have already procured for their immediate requirements. Continuing appreciation of rupee has hit exports and traders are now bound to liquidate their stocks in the local market as they cannot hold the stocks for long," said an official in the marketing department of Cotton Corporation of India (CCI). But as demand is poor owing to off-season, prices would go down, he added.

According to CCI officials, cotton from Punjab dropped by Rs 300-400 a candy. The central and southern zones have seen a decline in the range of Rs 500-700 a candy. The Shankar-6 variety is quoting in the range of Rs 18,800-19,200 a candy, whereas H4 and Punjab cotton are hovering around the Rs19,000 levels.

In the international market, prices have gone down by 3-4 cents a pound during the period. "At the same time, piling up of inventories in the US (the largest producer of cotton) is a matter of concern. China, which consumed almost 50 per cent of the cotton last year, is likely to see a fall in imports by 1 million tonnes," said an export official in CCI. The US is reported to have around 70 per cent of its production for export. China is expected to buy majority of its cotton requirement from the US.

Meanwhile, India may touch export figures of 50 lakh bales this year, up 6.38 per cent compared with the previous year's figure of 47 lakh bales. It has already exported around 20 lakh bales (1 bale = 170 kg) to China. Around 8 lakh bales each have also been exported to Pakistan and Bangladesh. Indonesia, Vietnam and Thailand are the other countries, where Indian cotton is shipped.

"Apart from our regular export markets, Turkey is a new destination, where the country is expected to export 6-7 lakh bales," added the CCI official.

The officials did not rule out the continuation of bearish phase in the cotton market. "Weak phase is there to stay. In June, prices should stabilise at lower levels," they said. So far, over 90 per cent of the total output (270 lakh bales) has reached the market.