By admin       2019-01-28

Monday January 28,2019 - The 2018-19 estimated cotton output is at 335 lakh bales (1 bale=170 kg), 5.25 lakh less than the November's estimate and almost 30 lakh down from last year's 365 lakh bales. Moisture deficiency this season has led to farmers uprooting cotton plants, resulting in no scope for the 3rd and 4th pickings. Going by the projected figures, production of cotton in India has been forecast at 26.3 mln bales for January-June. Interestingly, the lower estimate for cotton output in 2018-19 (October-September) has restricted major fall in prices. Otherwise, the most active MCX cotton prices traded lower due to the rise in arrivals in major spot markets. Arrivals of cotton across major spot markets in India by the end of the last week were estimated at 168,500 bales up by 17,500 bales from Wednesday, last week. Besides, escalation in trade tensions between the US and China and other geopolitical tensions driving uncertainty in business and trade weighed on prices as well. Significantly, a tariff war between the United States and China is playing a big part in the health and well-being of the US cotton market. On July 6, 2018, China imposed a 25 per cent tariff on all imported US cotton, selling at about 72 cents a pound for upland cotton, amounting to an approximately $525-per-ton tax. Cotton-industry analysts said that the tariffs have been extremely destructive to the US cotton market, whose biggest export country after Vietnam is China. In the 2017/2018 marketing year, the United States shipped 2.6 million bales of cotton to China, valued at nearly $1 billion. Mind you that China has a very healthy consumption of cotton. They are the largest consumers in the world. Again in September, last year, the US tacked on a 10 per cent tariff on $200 billion worth of Chinese products, which included fabric, handbags and electronics. Cotton is a big moneymaking product for the US, which exports almost all its domestic crop and is the largest cotton exporter in the world. Its biggest market area is Latin America, where cotton gets shipped to Central America to be spun into yarn and then made into fabric for clothes that come back to the US. The country’s second-largest cotton export area is northeast Asia. Analysts pointed out that with tariffs making US cotton cost more, Chinese cotton importers are looking to other countries—including Brazil, Australia and India—to fill their needs at a lower cost. When it comes to export of cotton from India, the present trend in overseas sales is not so promising with only 17 lakh bales exported from October to December. Going by the current trend in overseas demand and the fact that less cotton available in the domestic market, exports in 2018-19 may be nearly 51-54 lakh bales, lower than last year's 69 lakh, experts feel. On the pricing front, global cotton prices, though not very attractive from a fundamental perspective, still hold the potential to move up considering seasonal price trends. Remember that there is this renewed confidence that the US and China will end their trade dispute, which in turn, would support upward movement in the benchmark ICE cotton futures. So far, of the few fundamental factors that supported the bears in global cotton markets was lower demand from China hampered by trade disputes with the US. With seven months left for the 2018-19 global cotton year to end, it is still possible for Chinese imports to rise after mill inventories start to decrease. “The most active cottonseed oil cake traded down due to increase in stocks in major exchange warehouses. Sluggish demand from cattle feed industry in the spot market also weighed on prices. Stocks of cottonseed oilcake in NCDEX warehouses rose by 2,722 tn to 25,533 tn on early last week. The Multi Commodity Exchange of India Ltd, for the first time, has received deposits of 100 bales of cotton from Somnath Farmer Producer Company Ltd, based in Gir, Gujarat, the bourse said in a release. On the exports front, cotton exports to Pakistan are unlikely to see a sharp jump, despite the neighbouring country scraping import duty, as high domestic prices have made exports uncompetitive,” said the latest report from Geojit Finance. Sector analysts expect a gradual recovery in cotton prices as supply shortages may be felt with receding supplies in domestic markets.

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