Cotton prices have started declining after rallying for the last six months. The price of benchmark Shankar-6 variety fell from Rs 63,000 a candy (1 candy = 356 kg) to Rs 53,000-54,000 a candy at the spot market in the last fortnight.
The season is coming to an end and most of the crop has arrived in the market. At present, there is lacklustre demand and arrival of low quality cotton at the end of the season led to the decline in prices.
Out of the total of 31.2 million bales estimated by the Cotton Advisory Board, only 27.8 million bales arrived into the market. Even stockists have started offloading cotton in the market expecting further fall. Weak demand in the spot market has also pulled down the prices. The price of low quality Shankar-6 has fallen to Rs 45,000 a candy in Gujarat.
The government had capped the export limit of cotton at 5.5 million bales, which was completed by February. Those who were expecting permission for more cotton exports were holding stock, but have now started offloading as permission for exports is not coming.
Cotton is expected to fall further by Rs 3,000- 4,000 a candy if further exports are not allowed, said Arun Dalal, a cotton trader in Ahmedabad.
In the futures market, cotton is expected to reach Rs 950 per 20 kg on profit booking, said Dharmesh Bhatia, associate vice-president of Kotak Commodity Services.
Cotton yarn manufacturers are also not seen in the market as buying capacity has reduced, traders said. Further correction in prices of good quality cotton is expected and may also reach Rs 50,000 a candy if demand remains subdued, said Sunil Khandelwal, chief financial officer of Alok Industries. Mill buyers’ capacity was limited but now they are expected to wait and watch and will actively start buying once they see prices stablising at lower levels.
Mill consumption this season stood at around 2.15 million bales per month.
(Source: http://www.business-standard.com/india/news/cotton-prices-dip-14-in-15-days/432675/)
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