Delay in arrival stokes cotton rates

The recent spell of rains in major cotton-producing regions in the country is expected to delay the arrival of the new crop by a fortnight. Marketmen said this could result in prices rising in the next couple of weeks.

The country expects a bumper crop of around 300 lakh bales (1 bale = 170 kg) this season, up 11 per cent against the last year's output of 270 lakh bales.

"The cyclical rains in Gujarat, Madhya Pradesh, Maharashtra and northern states will postpone the arrival by around a fortnight," said a top official of the Cotton Corporation of India (CCI).

Normally, by the beginning of October, the new crop hits the market. Though the crop is arriving in some markets, the quantity is dismally low at 100-200 quintals a day.

Trading sources suggest that rains have raised the price of the Shankar-6 (Gujarat) variety by Rs 300 to Rs 19,700-20,000 a candy (1 candy = 356 kg) since Wednesday.

"In Maharashtra, cotton prices are ruling around Rs 19,400 a candy. As farmers are not able to bring their crop due to rains and the country is reaching almost the end of the season, with mills waiting for procurement, the market will remain steady for the time being," they added.

P D Patodia, deputy chairman, Confederation of Indian Textiles Industry, said, "Cotton prices are on the higher side this year and have not come down at all. Market is at par with the New York futures. Once the supply momentum starts picking up, the market should soften." A couple of months ago, cotton rates had even surpassed Rs 21,000 a candy.

According to sources in the CCI, arrival will be able to pick momentum only after mid-November. For another two months ahead, cotton prices might not decline, they said.

The market would witness downward pressure in December, when the arrival reaches 2-3 lakh bales a day. "With a surplus arrival in the domestic market, supply could exceed demand and, as a consequence, the market may cool off," they added.

According to analysts, the global cotton market is on the upswing as the projected global demand is much higher than the production. This factor, irrespective of the surplus domestic production, may not allow cotton to be bearish. Sources added that the US had already seen a dip of around 20 per cent in cotton acreage this year, which is foreseen to fall further next year.