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Cotton prices up 12% on global demand

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Dilip Kumar Jha Mumbai
Renewed international demand pushed up domestic cotton prices by 8-12 per cent in December, despite arrivals across the country now being in full swing.
 
Of all cotton varieties, the largest gainer was DCH32A, which shot up by Rs 1,700 , closing the month at Rs 12,654 a quintal. DCH32B was the next biggest gainer, posing a jump of Rs 1,500 from Rs 9,139 on December 1.
 
H4 variety failed to attract users, who bought limited quantity only to meet their needs. So, the prices of H4 ended the month almost at the December 1 level of Rs 4,781 a quintal. Variety 3797 rose to Rs 3,965 a quintal from Rs 3,656 while Jaidhar perked up to Rs 4,218 a quintal from Rs 3,796.
 
Marginal gains were recorded in J34 and Y1, which increased to Rs 4,415 a quintal and Rs 4,387 a quintal from Rs 4,302 and Rs 4,302 respectively on December 1. NHH and LRA gained by similar proportion to Rs 4,415 a quintal and Rs 4,640 a quintal from Rs 4,218 and Rs 4,499 respectively. Bengal desi variety lost Rs 112 to close at Rs 3,937.
 
The current rise in cotton prices is mainly attributed to the lower world production estimates during the current marketing year (MY).
 
Global cotton production in MY 2005-06 (August-July) is estimated at 111.7 million bales (1 bale=170 kg), down 7 per cent from the previous MY output, US Department of Agriculture sources said. Consumption, on the other hand, is expected to rise 5 per cent to 114.4 million bales. So, the cotton industry is likely to face short supply this year.
 
All major cotton-producing countries are expected to see lower production levels this year. China, Pakistan and Brazil are projected to witness over 85 per cent decline in output, while production in India and the US is estimated to remain flat. National arrivals today rose to 1,25,000 bales from 75,000 bales about a fortnight ago.
 
The total cotton production outside the US is estimated at around 88.6 million bales, down 9 per cent from the previous season output.
 
This is vis-a-vis the projected consumption of 108.4 million bales. US and China are estimated to account for 70 per cent of global rise in consumption during 2005-06, at 42.5 million bales. China's share of the global cotton consumption is set to surpass 37 per cent this year.
 
"(Domestic) traders were expecting prices to remain stagnant "� albeit with marginal fluctuations "� at least for the current season, for about three-four months, but huge demand from China raised prices substantially. The trend is expected to continue for at least one more month," a trader said.
 
Recently, the North India Cotton Association revised its cotton output estimate for 2005-06 (October-September) to 23.7 million bales. The Cotton Advisory Board too projected the output at a similar level of 24.3 million bales.
 
The opening stock for the current MY is about 7.2 million bales and imports are pegged at 6,00,000 bales. So, total output, as per the Board, will touch 32.05 million bales against total consumption of about 23.9 million bales. The Board is confident that the surplus will not affect the prices in the domestic market as exports markets has good potential.

 

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First Published: Dec 31 2005 | 12:00 AM IST

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