According to Indian media reports, India’s domestic fundamentals are currently tense, the cotton market maintains a bullish momentum, and cotton farmers are holding cotton sales. Therefore, cotton prices may remain close to historical highs in the next few months.
A floral yarn trader in the country said that the current daily volume of new cotton in India is around 150,000 bales, compared with 200,000 bales in the same period in previous years. Apparently cotton farmers are unwilling to sell and are waiting for better prices.
According to the Gujarat Cotton Trade Association, cotton processing volume at ginneries in western India decreased year-on-year in November and December 2021 due to lower-than-expected arrivals of new cotton. However, textile mills have sufficient stocks and will not panic purchase.
According to data from the U.S. Agricultural Counselor, the cumulative volume of new cotton on the market in India so far this year has reached 13.48 million bales, a year-on-year decrease of 19%. Indian industry research organization ICRA said that Indian cotton mills have purchased a large amount of low-priced cotton raw materials from last year, so business operations have benefited greatly since this fiscal year.
On January 27, the price of lint cotton in Gujarat, India was 75,500-76,000 rupees/kand, and the price shipped to the southern region was 76,000-76,500 rupees/kand. Quotations from ginners in Maharashtra are Rs 1,000/khand higher than those in Gujarat. Prices are high in the South because payments are often deferred.
According to the Gujarat Cotton Trade Association, the spot price of Indian cotton fell slightly last week after rising to 76,000 rupees/kand, and the MCX cotton futures price also fell accordingly. The price of the February contract was 36,760 rupees/bag (78,925 rupees/kand). Previously, India’s domestic cotton spot prices soared to a record high, driven by international cotton prices hitting an 11-year high. Indian cotton farmers expect cotton prices to rise by 20-30% this year based on the current level.
The Cotton Production and Consumption Council of India estimates that India’s cotton output this year will be 36.318 million bales, higher than the 35.384 million bales in the previous year. Indian industry insiders predict that India’s cotton output will be 33-34.8 million bales, the Indian Cotton Association’s forecast is 34.813 million bales, and the US Agricultural Counselor’s forecast is 35.475 million bales. At the same time, the Cotton Production and Consumption Council of India expects Indian cotton ending stocks to be 5.628 million bales, down from 7.32 million bales in the previous year.
Indian traders revealed that as India’s exchange rate against the US dollar fell below 75 to 1, India’s cotton export demand began to recover. At present, exporters are not in a hurry to purchase large quantities of spot goods, but only buy in small quantities. As of last weekend, India had exported a total of 2.5 million bales this year. Although overseas buyers think Indian cotton is expensive, Bangladesh has been loyal to buying Indian cotton to meet the immediate needs of factories.
According to the forecast of the US Agricultural Counselor, India’s cotton export volume this year is expected to be 7.6 million bales, while the Indian Cotton Production and Consumption Council’s forecast is 4.5 million bales, which is significantly lower than the 7.59 million bales of the previous year. The Gujarat Cotton Trade Association of India said that currently Indian yarn mills are only replenishing immediate inventory due to the sluggish yarn market. ICRA said that both domestic and export demand for Indian cotton are recovering. In the first nine months of this fiscal year, the average price of Indian cotton yarn increased by 36% year-on-year, and cotton prices increased by 42%.
ICRA said that Bangladesh’s strong apparel exports have driven India’s cotton yarn exports, and this fiscal year has replaced China as India’s largest customer of cotton yarn. In the first half of this fiscal year, it accounted for 40% of India’s cotton yarn exports. It is expected to be exported to India in the next 9-12 months. Import demand for cotton yarn will remain.
The report of the US Agricultural Counselor also believes that the demand for Indian cotton yarn and high-quality cotton textiles will remain strong, and the price of Indian cotton will remain high and there will be no significant price decline. Rising domestic cotton demand and tight cotton fundamentals will provide support for cotton prices.
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