Cotton spot prices in India rose on Monday on higher purchase by yarn makers and are likely to rise further over the next two weeks on expected intervention by the government to support prices, which could offset lacklustre export demand, traders said.
Local cotton prices rose on buying by yarn makers, who are expecting a 20 percent rise in yarn exports in the current fiscal, which offset rising supplies in spot markets. Supplies of cotton in the spot markets as of December 16 rose to 6.2 million bales of 170 kg each in the crop year that started in October, up from 5.1 million bales in the previous week.
“Farmers are demanding state-run Cotton Corporation of India (CCI) should buy more from the spot market to support prices. The CCI is likely to start procurement soon,” said Arunbhai Dalal, a trader based in Ahmedabad, Gujarat. This year, the government has fixed minimum support prices (MSP), the prices at which state-run agencies purchase produce directly from farmers, at 3,900 rupees per 100 kg, 15 percent more than the previous year. But due to a sharp fall in export demand and surplus production, the fibre prices have fallen below the MSP in most local markets.
Local cotton prices are pressured by low demand for the Indian fibre in overseas markets due to softening global prices, with the benchmark New York cotton falling around 25 percent from the year-high reached on January 23. On Monday, the most-traded domestic spot Shankar-6 variety rose by 600 rupees to 33,700 rupees per candy of 356 kg, (around 79 cents per lb), data from the Cotton Association of India showed. The January cotton futures contract on the Multi Commodity Exchange (MCX) closed up 0.12 percent at 16,860 rupees per bale (around 80 cents per lb) on Tuesday.