Cotton may trade lower on anticipation of improved arrivals: Angel Commodities Broking

Views of Mr. Ritesh Kumar Sahu (Fundamental Analyst - Agri Commodities, Angel Commodities Broking):

"Cotton futures prices have started to cool after hitting a high of more than Rs. 20,000 per bale on expectation of improved arrivals of cotton from the second picking in major cotton producing states. Major arrivals are expected from Gujarat as elections have concluded.

In the last one month, cotton futures have jumped about 10% due to lower arrivals and expectation of fall in domestic output due to pink bollworm attacks in major cotton growing states.

In the current season, the arrivals have been sluggish as farmers have been expecting higher prices for their produce due to lower production estimates by the government agencies and improved consumption by the domestic mills.

In its first estimate, Cotton Association of India (CAI), has estimated production of about 375 lakh bales (1 bale =170 kg), up by about 10% compared to last year production.

The physical market participants are expecting a further correction in prices in the coming weeks Indian cotton yarn exports to China is going down due to higher duty on Indian cotton yarn. India's exports to China fell10.2% year-on-year (y-o-y) to 464 million kgs (mkgs) between April and September this year as Vietnam, Indonesia and Uzbekistan are more competitive.

Moreover, export demand from the country has slowed down this season due to higher prices and lower quality of new cotton due to adverse weather during sowing period and pest attack during growing stage.

Going forward, the MCX January contract may correct to the level of Rs. 19,400 / 19100 per bale (CMP: Rs. 19,740) on expectation of good supplies in the domestic market in coming months."

Source : Equity Bulls

Keywords