In the short term, a major fall in cotton prices is expected in the domestic market. Imports are increasing due to the duty free cotton import policy of the government.
Cotton Prices: The textile industry can get relief in the prices of expensive cotton. In the short term, a major fall in cotton prices is expected in the domestic market. Experts say that in the next one to two months, the price of cotton may slip down to Rs 40,000 per bale in both the spot and futures market. Concerns about global growth, duty free cotton import policy by the government, forecast of a normal monsoon and forecast of increase in cotton acreage in 2022-2023 are causing pressure on prices.
Why is there pressure on prices
According to Tarun Satsangi, Assistant General Manager (Commodity Research), Origo E-Mandi, cotton is witnessing selling pressure, which is expected to continue in the near term. Cotton can come up to 40 thousand rupees within 2 months. The price of cotton ICE can also fall to the level of 131.5 cents per pound. He says that there are many factors behind the pressure on cotton prices. Imports are increasing due to the duty free cotton import policy of the government. At the same time, due to the forecast of better monsoon, the area under cotton is also expected to increase in the crop year 2022-2023. Due to this there will be pressure on the prices.
The decline may increase after the arrival of new goods
Ajay Kedia, director of Kedia Commodity, says that after a significant increase in the prices of cotton, there is a decline right now. The drought in America is coming to an end and the weather remains favourable. Agencies are predicting a better monsoon this year, which will increase the sowing area. There is demand after the pandemic but due to inflation
There has been weakness in buying. He says that the current fall is for the short term. However, when new goods start coming in the market in October, more correction can be seen in the prices.
Tarun Satsangi says that the price of the old crop – ICE Cotton July futures has fallen 20 cents or 12.8 percent from the high of 11 years. The price is in correction mode in the old crop-ICE Cotton July futures since May 17. Old Crop ICE Cotton July futures price broke the key support level and closed below the trend reversal point, which is a bearish sign in the coming days. If there is a possible slowdown in the US economy, then the prices of industrial commodities like cotton may fall.
Increase in import of cotton
According to Tarun Satsangi, Indian traders and mills have bought 5,00,000 bales of cotton from abroad after removing the duty. The total import for 2021-22 is now 8,00,000 bales. The total imports for 2021-22 will be 1.6 million bales with another possible import of 8,00,000 bales by the end of September. Most of the cotton imports have come from America, Brazil, Australia and West African countries.
Exports decreased due to higher prices
About 3.7-3.8 million bales of cotton have been exported in the 2021-22 crop year till May 2022, compared to 5.8 million bales in the same period a year ago. High cotton prices have made exports economically impractical. India’s cotton exports may be limited to 4.0-4.2 million bales this year, as against 7.5 million bales in 2020-21.
Sowing can increase in India
Cotton sown in India is estimated to increase by 5-10 per cent on an annual basis to 126-132 lakh hectares in 2022-23, as against 1.22 million hectares in 2021-22. Cotton is one of the attractive crops for 2022-23, given the high returns and forecast of a normal monsoon in India, but the area under cotton will be limited due to high labor cost as compared to other crops.
