Futures are trading at 57.41 cents, a level seen back in August 2009
international market has crashed to a level seen over six years ago and futures are now trading on ICE at around 57.41 cents. The price is lowest after August 2009. The fall is because of widespread fears of China, which has been a net big importer, will soon start selling cotton from reserves. ICE futures have fallen 10 per cent in 2 months.
"This is mainly due to the threat that China may offload its reserve cotton in the global markets. In 1999-2000 China turned net exporter after carrying reserves for prior three years and during this time the imports turned minimal during the time it exported cotton," said Prerana Desai, Vice President-Research - Agri Value Chain, Edelweiss Integrated Commodity Management Ltd. ICE cotton futures fell 16 per cent from July 2015 when international cotton season began.
The falling international prices along with lower imports by China has made India's cotton exports unviable. India has exported 44 lakh bales (170 kg each) so far and the Cotton Advisory Board under Textile Commissioner's office has estimated 70 lakh bales exports this year. At present exports to Pakistan and Bangladesh is happening due to freight advantage Indian players have which make it viable.
With falling global prices and farmers holding huge stock expecting higher demand due to lower crop have now started offloading according to trade sources. Prices in local market has fallen to Rs 33.400 per candy (356 kg each).
Edelweiss expect sthe downside to the Indian prices remain limited mainly because at lower levels demand from exporters as well as millers will increase and stop the prices from going sharply lower.
Cotton consumption data as given by the Ministry of Textiles suggest a sharp decline in Nov 2015. At 23.75 lakh bales the consumption for November 2015 was down 3% m-o-m. The cumulative January-November consumption at 277 lakh bales has slowed down to 2.7% from the earlier cumulative growth.
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