By admin       2019-05-16

MUMBAI – The Cotton Corp of India has decided to not slash the reserve price in its ongoing auctions despite a slump global prices as severe shortage of good quality cotton in domestic market would continue to attract buyers, sources in the state-owned agency said.Since start of auctions in April, the agency has so far sold 140,000 bales (1 bale = 170 kg) of cotton at 47,500-48,500 rupees a candy (1 candy = 356 kg), depending on the quality.Currently, Cotton Corp is offering 30-mm Bunny Brahma variety of cotton at a reserve price band of 48,000-49,000 rupees a candy. This is on the higher side of spot prices for the same variety, which are at around 48,000 rupees in Telangana and Maharashtra. Similar quality sankar-6 cotton in Gujarat is also traded at 48,000-48,500 rupees. The selling price of Cotton Corp is still much below its procurement cost of 51,500-52,000 rupees a candy. The company had procured 1.1 mln bales of cotton in the current year at a minimum support price of 5,450 rupees per 100 kg for long staple variety and 5,150 rupees for medium staple cotton. Since the beginning of this month, cotton prices on ICE Futures US have plummeted nearly 15%, with prices hitting multi-year low of 64.50 cents a pound on Tuesday, following China's retaliatory move to hike tariffs on $60 bln worth of US goods in response to the US' move to hike tariffs on $200 bln worth of Chinese goods. The trade war between the world's two largest economies have rattled commodity markets. Indian cotton market, however, showed resilience, falling only 10% in the futures market during this period. Prices in spot market are down just 5-6% amid severe supply crunch due to lower production, though volumes have fallen due to volatile prices.According to Cotton Association of India's estimate, India is likely to have produced 31.5 mln bales of cotton in the current year, compared with over 36 mln bales a year ago. Prices of India's 28-29-mm cotton variety had fallen to 43,500 rupees early Tuesday, but they have now recovered to around 44,500 rupees a candy from 48,000 rupees in the first week of May.Cotton Corp doesn't see any competition from cheaper imports as local mills depend only on Cotton Corp's auction for better quality cotton. Trade sources and US Department of Agriculture agree that the quality of the 2018 US crop was affected due to rains in Texas at the time of harvesting. With the supply shortage worsening over the next couple of months, market participants and Cotton Corp officials expect prices to jump to around 52,000 rupees for 30-mm variety. As a result, the corporation is in no hurry to sell its stocks, sources said. End

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