The demand for cotton from textile mills is appearing only when there is a decline in cotton prices. In addition, the Government policies of China and India, two major cotton producing countries, also affect the prices of cotton in international markets.
The bearish trend in global cotton markets are also due to a downturn in global cotton trade as well as owing to high ending stocks during the previous season.
The price of cotton in China’s domestic market continues to get support from the Government policy of buying cotton for state reserves. However, the manner in which the Chinese Government will release its cotton stock, estimated to be about half of the global ending stocks, would affect international cotton prices to a great extent.
Meanwhile, the Indian Government has upwardly revised its minimum support price (MSP) for long-fibre cotton for the current year to Rs. 3,600 per quintal from the earlier Rs. 2,800 per quintal. Similarly, the MSP for long-staple cotton has been raised from Rs. 3,300 per quintal to Rs. 3,900 per quintal.
As per the estimates of the Cotton Advisory Board (CAB), India’s cotton production during the current season is likely to be 5.678 million tons, while domestic consumption is pegged at 4.42 million, thus leaving only 119,000 tons for export.
All the above factors would together determine the way the prices of cotton will move in international markets in the coming months.