After riding high in July and August, domestic cotton prices are expected to ease in the coming months due to arrival of new crop coupled with lower consumption and exports in the current season, says a report. Cotton prices in futures market have been trending down since last month. They are however still on the higher side at Rs 19,650 per bale. The prices are 25 per cent higher as compared to last year for the same period.
"The major factors which will decide cotton prices in coming months are exports and domestic mill demand for Indian cotton," Angel Broking Agri Commodities Analyst Ritesh Kumar Sahu said in a report. "As per the Cotton Association of India (CAI), the cotton supply in the domestic market will be sufficient as the export and consumption will be lower during the current cotton season," he said.
Cotton harvest has also started and new kapas has arrived in the market. It will still be time before peak arrivals start after Diwali, during December and January, due to late harvest expected in Gujarat and Maharashtra.
Total availability of cotton in the country is pegged at 398 lakh bales versus estimated consumption of 309 lakh bales. The export will decline by 40 per cent in 2016-17 to 849,000 tons compared to 12.55 lakh tonnes last year. MCX-Cotton and NCDEX-Kapas future prices fell 2.7 per cent and 4.13 per cent in last one month on lower demand from the industrial users like ginners, cotton mills and textile units.
Moreover, due to prospects of higher crop production in the country, the prices of cotton have been falling during the last 2 months of August and September of the cotton season.
"We expect MCX cotton prices to ease a bit towards Rs 18,500 from the current market price of Rs 19,640/bale, while NCDEX Kapas from market price of Rs 870/20 kg can move lower towards Rs 800 during the peak arrival season in November and December," said the Angel report.
Earlier, cotton prices have touched three years high during July and August on reports of lower cotton acreage in Punjab and Haryana. With increase in the cotton prices, acreage in the country recovered during August-September on above normal and well distributed rains in cotton-growing states.
As per officials of the Nagpur-based Central Institute for Cotton Research (CICR), the yield forecasts for cotton will increase by 10 per cent due to sudden spell of heavy rains in cotton growing regions of Maharashtra, Gujarat, Telangana and Karnataka during last weeks of September but there are every chance of delay in arrivals, the report said.