Monsoon Forecasts Likely To Determine Cotton Prices

The cash crop witnesses 25-30% price fall in past few months as in the case of other kharif crops, cotton too is awaiting monsoon forecasts to get a direction for the prices in the medium to long term.

Cotton prices have been largely bearish for the last one year; they have fallen 25-30 per cent in the past few months. Prices have been sliding since June last year. In May, kapas prices in the futures market have been around Rs 1,100 per 20 kg levels. Good monsoons prevailed upon most of the kharif crops, including cotton, since June.

In August, prices were around Rs 950 levels. It briefly went up to Rs 1,070 due to short covering and by November fell to Rs 905 levels.

“In October-November, prices remain subdued due to fresh arrivals. However, they go up during December due to higher export demand. In December prices, went up shortly to Rs 1,140 and fell to Rs 750 levels as export demand tapered down by February-March. The cotton crop too was bigger this time compared to the previous year,” said Ajitesh Mullick, AVP-retail research of Religare Commodities.

Cotton production in 2013-14 has been 37.5 million bales of 170 kg against 36.5 million bales in the previous year. The country usually consumes around 25-26 million bales and exports the rest.

“China is the biggest buyer of Indian cotton. The demand from China has been less in the past few weeks. There were reports that China has high levels of stocks and was planning to reduce its stock levels,” said Mullick. This brought down the prices of cotton in the market.

“However, on the price front, much will depend upon the monsoon prediction by Indian Meteorological Department which will be out in around 10 days. There are assumptions that due to the El Nino factor, India will either receive insufficient rains or that the monsoons will get delayed. This will affect sowing of all the kharif crops and prices across agri-commodities might go up. The subsequent predictions on monsoons in May and June also will affect the movement of prices in the medium term,’ said Mullick.

In case of IMD predicting regular monsoons, bearishness will continue in the cotton counter. But as the commodity has fallen more than 25 per cent in the past few months, further fall is not anticipated. On the other hand, a defective monsoon can push the prices at least by 15-20 per cent up in the medium to long term.

Source:- mydigitalfc.com