Drop in cotton prices in India owing to heavy speculation

Domestic cotton prices have dropped by nearly R500 per quintal to trade to around R5,400-5,500 a quintal from R6,000 around 10 days ago owing to heavy speculation in the futures trade and MCX in this period despite the global rates remaining steady, according to top officials of the Cotton Corporation of India (CCI).

Farmers who were holding onto Kapas in anticipation of better prices will now start to bring in the commodity into the market on the fear of prices coming down, said M M Chokalingam, CMD-in-charge, CCI.

Arrivals have improved to 1.8-2 lakh bales as on Monday which is very high as compared to 1.60 lakh bales arrivals same time last year.. The total arrivals till date have come up to 190 lakhs as compared to 195 lakh bales same time previous year. This is because farmers have been holding onto Kapas expecting higher rates.

CCI has also been purchasing cotton at commercial rates and has purchased around 70,000 bales till date. In the last couple of days, the purchases have been aggressive due to the price drop and purchase centres have been directed to go aggressive on the purchase.

According to market observers, MCX rates have dropped while they were high last week for reasons unknown to many. Farmers will now begin to bring their Kapas into the market on the fears of a further drop, observers said. Prices may drop further in the short term.

While India’s domestic rates have been fluctuating between R38,000 per candy to R44,000 per candy because of speculation in the futures market, International rates of Kapas have remained steady in the range of R44,500 per candy