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Cotton prices to remain weak due to poor demand from China

This year the government expects cotton production to be 32.26 million bales.

, ET Bureau|
Last Updated: Jan 24, 2020, 04.36 PM IST
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On the NCDEX, cotton seed oil cake for February delivery was down 5 per cent at Rs 1,980 per quintal compared to the first week of January.
New Delhi: Cotton prices have fallen 3 per cent in the past two weeks and are expected to remain weak for two months because of low demand from China and huge stock with the government agency.

The Cotton Corporation of India has so far procured 4 million bales of 170 kg each out of the 10 million bales target from markets at the minimum support price (MSP). This year the government expects cotton production to be 32.26 million bales.

“Indian cotton prices are 5 per cent higher than the international prices due to the higher MSP. This is making us uncompetitive in the global export market. With subdued demand from China and huge stock in the country, the prices have remained range bound and, at lower level, will be at Rs 19,400 per bale,” said Manoj Jain, head of commodities at IndiaNivesh Research.

Similarly, cotton seed oilcake, or kapaskhali, prices were also down from Rs 2,427 per quintal in November to current price of Rs 1,991 per quintal. A vital protein source, cottonseed oil cake demand is largely in the dairy sector, which consumes it for animal feed. In winters, the requirement falls due to availability of green grass. Jain said the oil cake prices can come down by 4 to 5 per cent in the next two months.

On the NCDEX, cotton seed oil cake for February delivery was down 5 per cent at Rs 1,980 per quintal compared to the first week of January. On the MCX, cotton future prices for January delivery was up by 0.3 per cent at Rs 19,600 per bale on Wednesday closing.

Mahesh Sharda, president at Indian Cotton Association, said the virus outbreak in China along with Chinese New Year holidays has disturbed the global markets for the next fortnight and they expect clarity on export orders only by mid February.

Sharda said over 2 million bales of cotton have been exported in the current cotton crop and another 2.5-3 million bales will be exported this crop year, similar to the previous year. “If the rupee strengthen against the US dollar, we can expect exports to increase,” he added.

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