Cotton prices likely to see mixed trading in India

Cotton prices may trade on a mixed note. Forecast of below normal rains, lower sowing, demand from the millers and declining supplies may give support to the prices. However, higher production, lower cotton yarn exports, global demand concerns and comfortable supplies may pressurize prices at higher levels.

However, concerns over global demand coupled with higher output last year and weak cotton yarn exports to China capped sharp gains. NCDEX Kapas as well as MCX Cotton futures settled 0.4% and 0.1% higher.

Cotton Association of India has revised its 2013-14 production to 388.25 lakh bales. The CCEA has increased MSP for cotton by Rs. 50 to Rs.3,750 for medium staple variety and long staple variety at Rs.4,050.

Domestic Production and Consumption according to the Ministry of Agriculture, cotton sowing as on 26th June, 2014 stands 47.9% lower at 2.91 mn ha as againstn5.58 mn ha last year.

According to 3rd Advance Estimates Cotton output for 2013-14 is projected at 36.5 mn bales against 34.22 mn bales last year. Cotton Association of India estimates 2013-14 cotton crop at 383.5 lakh bales against earlier estimates of 381.3 lakh bales. 2012-13 output stood at 356.75 lakh bales.

As per latest CAB estimates, total arrivals as on 14th May 2014 were reported at 295.16 lk bales as against 308.5 during the corresponding period in the previous year, a decline of about 4.32 percent. India is estimated to export less cotton (about 9 million bales) on expected drop in demand from the largest consumer, China.

Domestic consumption is expected to grow at a normal pace while imports are expected to increase due to cheaper availability of cotton in the global markets.

Thus, supply side fundamentals (42.7 mn bales) are comfortable to meet the domestic as well as export demand (38.7 mn bales) keeping domestic cotton prices stable.