Foreign companies bullish on Indian cotton

Prices rise by 7% in February

Cotton price has shot upwards by almost 7 per cent in the month February thanks to foreign companies buying cotton heavily since last one month to stock it for better price expectation. Following this, domestic mills have also increased their demand led by good yarn export anticipation.

In fact, according to cotton market sources, with arrivals declining, prices may go up to Rs  38,000 per candy.

"Cotton prices have firmed up since last two three weeks as foreign companies have increased their buying from here. Moreover decline in arrivals and domestic mills' increased demand have been supporting the price rise," said Arvind Patel, director of Jaydeep Cotton Fibres Private Limited.

According to market sources, foreign companies like Switzerland based Glencore Grains, Netherland’s Louis Dreyfus Commodities, Singapore based Olam International are buying cotton from across India. Sources said that global companies have so far purchased about one million bales cotton from India. From February 1, 2013 to till date cotton prices have gained from Rs  34,000-34,100 per candy of 355 kg to Rs  36,500-36,600 per candy. Per day arrival has also come down from 55,000 bales to 40,000-42,000 bales in Gujarat. Cotton arrival in India declined from 2,15,000 bales to 1,75,000 bales in India.

"As this year cotton production is expected to come down due to weak monsoon, cotton supply shortage will be created at the end of the season. As a result, demand of international as well as domestic companies is moving up,"

Arunbhai Dalal, an Ahmedabad-based trader and exporter, said, "So far in Gujarat 5.4 million bales cotton come and 21.4 million bales cotton come in India. Till the date India has exported about 5.2 million bales from about 6.5 million bales cotton export registration."

Anand Popat, secretary, Saurashtra Ginners Association (SGA) said, "Farmers are not willing to sell their cotton at this price level as they want more. In the coming days, demand may increase more as price of Indian cotton price is less than international price. Domestic mills' demand is also one of the reasons for price rise in recent time."

Cotton price in international market is about Rs  38,500-38,800 per candy, higher by Rs  2,200 per candy compare to Indian cotton. According to Anand Popat, cotton price may increase to Rs  38,000 per candy in next one month if demand continues.