Cotton seen weak on low demand

Cotton spot prices are seen falling in the week ahead tracking low demand in markets across the country and declining exports, analysts, traders, exporters and brokers said on Wednesday.

Rakesh Kumar, an independent analyst, said normal arrivals coupled with weak domestic and falling export demand are bound to pull cotton prices down in coming days.

"So far 20 million bales (1 bale=173 kg) or two-thirds of the crop has arrived out of total estimated output of 31 million bales for 2007-08 (October-September). Exports have almost halted as China and Pakistan, two main importers, wait for still lower Indian prices," Kumar said.

Kumar said that domestic demand has waned because of sluggish cotton yarn market. "Yarn market is down following steep drop in clothing exports due to the rupee's appreciation against the dollar."

According to exporters, overall slackness in global commodity as well as other markets will impact domestic cotton prices adversely.

"There is a recession-like situation in world commodity, equity and property markets. It has hit both the US and Indian commodity markets, particularly cotton. The trend will persist for now," said exporter Suresh Kotak at Kotak & Co.

Kotak said the domestic demand is at low ebb owing to the absence of fresh demand from yarn/textile mills. "Whatever small demand that is there is part of the purchase programme chalked out by mills before 2007-08 arrivals began."

Nandkishore Agarwal, president, Maharashtra Cotton Brokers Association, said the prices of all varieties are expected to fall by Rs 200-300 a candy (356 kg) in a week or so. "In fact, prices are already on downward journey from on Wednesday."

"Prices will slip also because normally demand weakens in the second-half of February every year. It happens so because most of the bulk buyers such as mills and exporters have completed their buying between start of the new season in September and mid-February."

Trader Ram Swaroop at Dindayal Purushottamlal, Sirsa, Haryana, said a sudden slump in demand from mills and exporters has already taken its toll on prices on Wednesday. "Prices will tumble in 3-4 days on the same factors."

Kamlesh Raheja, vice-president, Coimbatore Cotton Association, said prices of two key varieties "" Gujarat sankar6 and Mech1 "" are most likely to soften by Rs 250-300 a candy, primarily on lacklustre demand from exporters.

"Daily arrivals rose on Wednesday to about 120,000 bales from 99,000 bales on Tuesday. Sellers have started facing shortage of both cash and storage space.

The situation is bound to compel sellers to slash prices in a day or two," said Raheja.