Cotton prices are expected to rise marginally and remain strong for 2019
after rising substantially in 2018. The current weakness is also seasonal in
nature. The prices are expected to average at `125-127 per kg for cotton
season (CS) 2018-19.
Further, prices are also expected to be supported by weakened rupee and
rising consumption in both the domestic and overseas markets. Prices would
also be affected by the ongoing trade talks between the US and China, CARE
Ratings said in a note.
In view of high cotton prices and competition from lower-priced Bangladesh
yarn, domestic manufacturers, especially the smaller yarn ones, are expected
to be affected. However, the medium to long-term decrease in yarn demand
from China is expected to be offset by improvement in the demand from
other nations, the note added.
Early in February 2019, the Cotton Advisory Board (CAB) revised its cotton
output estimate to 330 lakh bales (1 bale=170 kgs) from the previous
estimate of 335 lakh bales for CS 2019, beginning October 1, 2018, for the
third time.
This downward revision in production was largely attributed to the water
shortage faced by cotton crop in southern states, including Telangana,
Andhra Pradesh and Karnataka, and pink bollworm attack.
There are reports that farmers had already uprooted their crop, denying a
chance for additional pickings. The current year’s output estimate is lower
by 9.5% year-on-year, against the output in CS 2018 which was 365 lakh
bales.
According to the CARE Ratings’ note, cotton prices have come off last
season’s high and are trending lower at `125 per kg for Shankar-6/Shankar-
4 and `117.8 for J-34(Sg) on a month-on-month basis but are still higher yo-y.
Spot prices on the Multi Commodity Exchange of India (MCX) have also
softened.
Lower prices have been attributed to poor offtake by mills, which have excess
yarn stocks, amid rising arrivals and sluggish exports due to slower demand
from China.
Further, as indicated by the Cotlook A index, international prices have also
softened. However, this decline has negatively affected sentiment as there
are reports of the Cotton Corporation of India having procured 8.5 lakh bales
of cotton, against 3.6 lakh bales bought in the similar period last year.
In line with the prices, cotton yarn prices have also witnessed sluggishness
during the period.
Source: The Financial Express, India Friday, 22 February 2019