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Cotton traders wait for price to fall

Cotton traders wait for price to fall

Thu Nov 02 2017


Indian traders have not signed new cotton export contracts in the past one week as domestic prices may take a little longer to decline to get export parity. The Gujarat government has announced a bonus to cotton farmers above the Minimum Support Price (MSP), which has prevented prices from moving down.


"Indian cotton prices are not competitive at this moment for exports. Once cotton arrivals pick up, Indian cotton can again become competitive," Mumbaibased cotton exporter Nayan Mirani said.


Market sentiment has moved up ever since Gujarat announced the bonus to farmers, traders said. The state is the top cotton producer in India, accounting for a quarter of the nation's production of the fibre.


According to exporters, India's forward cotton exports for November-January have declined substantially over the previous year due to multiple factors. Now, traders are waiting for daily arrivals to go up, which may put prices under pressure and bring export parity.


According to trade experts, Indian millers consume about 1 lakh cotton bales (each 170 kg) a day. Once cotton arrivals reach 1.5-2 lakh bales a day, prices could come under pressure.


Most millers entered into forward contracts at lower than Rs 38,000 a candy, while current prices are ruling at Rs 38,500 a candy (365 kg). Though there is a short-term lull in exports, traders are confident it would gather pace again.


"For millers in Pakistan and Bangladesh, India cotton is the best option," said a trader.


India's cotton production is likely to be between 385 lakh and 400 lakh bales, domestic millers are not willing to stock the commodity at current prices.



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