Cotton prices will keep exploding until the new season
Cotton prices will keep surging in June and moderate a bit in July this year. However, they may continue the surge entering the new marketing season in August. The main reason is the adverse climatic conditions that are currently prevailing in the US largest cotton growing region of Texas.
In Southeast, heavy rains were battering fields, while drought in Texas and Oklahoma is feared to damage the crop there. US cotton Futures has been a key influencer to other markets while demand supply estimates put out every month by USDA’s WASDE report are also impacting global pricing. High prices have also inspired farmers to increase cotton acreage to the highest level in seven years, sowing about 13.5 million acres under the crop this season. Many farmers, especially in Oklahoma and Kansas, are sowing cotton instead of lower-value crops like wheat and soybeans.
In other markets of India and Pakistan, prices will remain elevated as usual at this point of time because all the crop stands sold. Arrivals have come down to a trickle in Indian mandis. For 2017-18 season, a total of 324 lakh bales had arrived until end-May. The Cotton Association of India has retained its estimate for cotton crop at 360 lakh bales (each of 170 kg) for the season 2017-18. This implies that 90% of the crop has already arrived in the market by May 2018.
In Pakistan, water scarcity and severe hot weather was affecting standing crop quality besides volumes. Sellers were looking the cottonseed price and shrinking stocks coupled with growing demand for better grades cotton will provided ample opportunities to demand higher price.
According to Global Cotton Price Forecast report for June, Textile Beacon predicts that prices will rise further during the month. US cotton Futures will add atleast one cent to July contract over and above the US cents 9 added in the past three months. Cotlook ‘A’ Index too will added similar value in June following US cents 6.50 increase since February.
Cotton prices were seen galloping in China during May amid global markets concern that China is sitting on a massive stockpile that it could unleash, potentially collapsing prices. This fear has kept cotton farmers and traders on edge around the world. However, earlier China had a buffer stock for one-and-a-half year’ worth which is now come down to a year’s stock.
In India, cotton prices will go up INR300 per candy in June as arrivals slacken at the end of the season. Prices also will remain on the higher side with international prices on the rise. According Cotton Corporation of India, prices usually go up at this point in the season because of the slowdown in arrivals. With more demand coming from spinning mills as well as ginners, prices are likely to remain firm.
