The cotton market will show signs of pressure, for at least a short timeframe.
The reason? It looks like there is going to be lot of cotton world over.
Addressing the 95th Annual General Meeting of Mumbai-based Cotton Association of India, Nayan Mirani stated recently, “Cotton prices are likely to witness a depressing trend.” The supply situation will dictate the price, while other factors may also factor into the price situation.
Even with the losses due to recent hurricanes in the U.S. Cotton Belt, the size of the U.S. crop is expected to be larger. Indian acreage for the current season (October 2017-September 2018) is expected to increase by about 12% compared to last year. Expecting yield to increase by about the same percentage points, India will have a bumper crop. If this scenario turns out to be correct, it may create a situation that will warrant the Indian government to support farmers by kicking in the minimum support price (MSP) operations.
Among many factors that have led to the increase in Indian acreage, an important aspect has been the shift from cultivating oil seeds and pulses due to lack of good prices for these commodities. There has been a stagnancy in prices of these commodities, and the government had to apply MSP for these products, stated an Indian market expert.
The cotton price is under pressure, as the mill demand is not high. To exacerbate this situation in India, a confusion is prevailing with regard to the implementation of the GST system. Given that the Indian rupee has slightly weakened against the U.S. dollar recently, export of goods such as textiles should be in high gear – which really is not the situation on the ground.
Weather, so far, has been reasonably good for the Indian crop. Major cotton producing regions in Punjab, Haryana, Maharashtra, Rajasthan and Madhya Pradesh have received sufficient rainfall during the flowering season, which should translate into a good crop this season.
Buyers are basically in a “wait and watch” situation, which is inserting pressure on the cotton market. Hopefully, stated an experienced and reliable source from Mumbai, there will be some stability from January of next year.