Cotton on MCX settled up by 0.74% at 21880 on expectation of lower production in the next season. The production of cotton is likely to decline by 12.4% to hit the lowest in five years for the current crop year (October 2015-September 2016). The Cotton Advisory Board (CAB) has lowered the forecast and now estimates the output at 33.8 million bales (a bale is 170 kg) for the current crop year, as against 38.6 million bales the previous year. The board lowered the output due to crop damage in major producing states.
Given, the widespread pest attack on Bt cotton crops, the yield per hectare has dipped to 482 kgs from 511 kgs. The area under cotton has dipped by 7% to 119 lakh hectares (lh) against 128 lh registered in the same period last year. Punjab’s output is estimated at 750,000 bales for 2015-16, from 1.3 million the previous year. Haryana has also reported big crop damage, with the estimate at 1.5 million bales this year as against 2.3 million last year.
According to the International Cotton Advisory Committee (ICAC), global area under cotton is expected to contract by one per cent to 31 million hectares in 2016-17, the area in India is expected to expand by one per cent to 12 million hectares in 2016-17. Technically market is under short covering as market has witnessed drop in open interest by -9.32% to settled at 467 while prices up 160 rupee, now Cotton is getting support at 21734 and below same could see a test of 21587 level, and resistance is now likely to be seen at 21964, a move above could see prices testing 22047.
–Cotton trading range for the day is 21587-22047.
–Cotton prices gained supported on expectation of lower production in the next season.
–The production of cotton is likely to decline by 12.4% to hit the lowest in five years for the current crop year.
–The CAB has lowered the forecast and now estimates the output at 33.8 million bales for the current crop year.
–Cotton prices in spot market gained by 50.00 rupees and settled at 22520.00 rupees.
Courtesy: Kedia Commodities