Cotton prices depressed across major markets, yarn follow suit

In early June, YnFx had predicted that cotton prices will remain subdued in June as global supply and demand volumes then pointed to sustained weakness while a number of factors were underpinning the recent improvement. As the month crossed its first half, cotton prices were depressed across major markets on ample supply amid poor demand.

In the week ended 19 June, cotton Futures dropped as most in the trade remained long-term bearish indicating that US may have a good crop despite less area under the crop this year and world stocks will generally remain very large. December cotton contract ended the week on a downbeat feel of 1.2 per cent. The Cotlook A index however, gained US cents 0.15 per pound on the week while the China Cotton Index edged up further by 5 Yuan a ton.

In India, a better-than-expected monsoon rains boosted production prospects and prices retreated further on dull buying activity. Market arrival of fibre also dropped as the harvesting season was approaching an end. Gujarat Sankar-6 cotton was traded down INR800 per candy on the week while others were down INR100-900 a candy.

In Pakistan, trading was range-bound at leading centres due to stiff arrival of fine cottonseed at ginneries and grade issue with liquidity problems also forced buyers to recount value before making any deal. During the week, KCA spot rate fell PakRs100 per maund ex-Karachi.

Downstream, cotton yarn markets were gloomy in China with prices dropping for some regular specs. Spinning mills were sitting on high inventory given poor offtake, and liquidity lagged for most trades. Demand continued to wither while the release of state cotton auction policies was weighing on prices. 32s cotton yarn in Shengze market remained flat at 20.30-20.70 Yuan a kg, while 21s were down at 19.10-19.50 Yuan a kg.

In India, retreating cotton prices depressed demand for cotton yarns, as buyers expected further fall in yarn prices. However, Ludhiana market was in contrast, where cotton yarn prices rose in the week. 30s carded and combed yarn for knitting was up INR2.50 a kg (or US cents 3) week on week in Ludhiana.

In Pakistan, cotton yarn prices declined on export markets due to a lack of buying interest mainly from China and the Far East. 30s carded yarn for weaving rolled over at US$2.78 a kg.

Courtesy: Cotton Price Forecast Report