Cotton prices likely to sober in March but will remain firm until July

Cotton prices have been on the high since past one year. But now, going ahead they may reverse their march. The New York futures March contract liquidation was ongoing and mill fixations took place at prices much higher than expected. Nevertheless, a large number of contracts rolled over into May and July implying that mills postponed the pain of fixing contracts at current levels. But for the time being there is no certainty that prices will lower. Another period of volatility is due for May liquidation period. However, Futures may ease a little in March but the pent-up demand will set a floor on prices.

In China, government intervention in the cotton sector will continue to influence its development. With Xinjiang producing 80-85% of country‘s cotton, the preferential policies for cotton growing in the province and subsidies for transport to eastern provinces will also apply to the textile industry and cotton spinning in the region. Recent reports indicate spinning capacity in the province stands at 15 -million spindles. With a goal of reaching 23 million spindles in 2020. In India cotton prices (Shankar-6) will sober in March as production is above last year’s level. Prices were supported by the demonetisation that disrupted the normal flow of cotton late in 2016. This should prove to be the case again to help tide the cotton market through to August – a key month for Southern Hemisphere supplies.

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