Cotton Insights for July 21, 2016

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  • Cotton prices dropped third straight session today in major markets of India on poor demand and good sowing progress.
  • Cotton prices sheds over Rs 200/maund in Northern regions while prices in Central and South India corrected over Rs 2,000/candy (356 kg each) in the last couple of days as spinning mills had opted to stay sidelined at the higher level.
  • Higher prices is not favorable for India Cotton and textile industry as competition in the global market is stiff and higher domestic prices may hurt exports prospects resulting huge to losses to mills.
  • Indian Cotton is still 5-6 cents premium over ‘Cotlook Index’ and for better prospects it should turn into discount to attract overseas demand.
  • Cotton may observe correction in its prices in near term due to slack demand at higher level.
  • Cotton prices in the domestic market are higher than international market by 5-7%, hence prices are expected to decline in the level of global market.
  • Much fall is not possible amid tight balance sheet of Cotton.
  • Nearly 0.75 million bales of Cotton was imported between October 1, 2015 and June 30, 2016 and the volume of import is expected to remain same in next three months of July, August and September.
  • It is still too early to predict anything as supply-demand balance sheet is tight and any disturbance in weather or pest attack to new crop may push Cotton prices higher.
  • Pakistan likely to turn towards US for Cotton during the current fiscal year 2016-17 as prices in India has turned uncompetitive after recent sharp rally.
  • Pakistan imported around 2.5 million bales from India so far from total import of 3 million bales to meet its domestic requirement after crop failure due to unfavorable weather and pest attack.
  • China Cotton imports during June month dropped 55% to 72,750 metric tonnes from a year ago.

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