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What is behind this year's Indian cotton price anomaly?

- Nov 20, 2018 -

Since the beginning of the cotton year in India, the domestic market has been abnormal. With the increasing quantity of new cotton available, the spot price has been higher and higher. The spot price of the s-6 has risen to 130.42 rupees/kg, up from 105.34 rupees/kg in November.

Since October 1, the total quantity of new cotton available in India has reached 2 million bales, and the forecast of annual output by traders and trade associations is different, with the total range of 343-38 million bales. The average daily quantity of new cotton available in India has exceeded 100,000 bales, which will continue to increase in the future.

Historically, Indian cotton prices have typically fallen after the start of the New Year. However, Indian cotton prices have held firm since October, mainly due to a sharp increase in MSP prices this year, up 26-28 per cent year-on-year, and the CCI is ready for MSP acquisitions. India's domestic spot price is now 1-1.5% higher than that of MSP, according to India's cotton corporation (CCI). However, the CCI said that could change as the volume of new cotton goes on sale.

The Indian cotton federation says the current market mentality is more important than the effect of supply and demand on prices. At the same time, the changes in international cotton prices also have an important impact on Indian cotton prices. If China imposes tariffs on us cotton, it will have a profound impact on international cotton prices and Indian cotton prices.

The cotton association of India said that the market is concerned about cotton production in India this year, as the year goes on, the price of high-quality cotton in the later stage will not necessarily decline much. The market thinks that the textile mills' procurement is only to meet the immediate demand, and they are waiting for the quantity of new cotton to increase after the price gradually stabilizes.

Currently, cotton yarn sales in India are sluggish, but it is expected to gradually recover in the next few days. From April to August this year, India's cotton yarn exports reached 553,000 tons, much higher than the 364,000 tons in the same period last year. The future Indian cotton textile market depends on the trend of cotton price. At present, the domestic cotton price is lower than the international cotton price.

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