Market Analysis: Why India'S Cotton Price Hit A New High In Recent Five Years?

 

According to the feedback from some Indian cotton enterprises and international cotton merchants, although the main contract of ice cotton futures fluctuated around the 80 cents / pound level, the rise of the US dollar index led to a periodic correction of commodity futures, and Cai raised the total cotton production forecast of India in 2020 / 21 from 35.6 million bales to 35.85 million bales, India's McX futures and domestic cotton prices continued to rebound, and the S-6 quotation rose to a new high in recent five years.

 

Several cotton processing enterprises and private traders in Gujarat and Maharashtra state said that driven by the sharp rise in domestic price of lint and FOB / CNF quotation, the purchase price of seed cotton of each plant was close to or slightly higher than the MSP purchase price of CCI (Gubang's high-quality seed cotton purchase price even rose to INR 6000 / kg, while MSP was 5825 rupees / kg), which was driven by the sharp rise of lint domestic price and FOB / CNF quotation Due to the low standard of seed cotton water purchase, the settlement of payment for goods is relatively fast, and there is room for negotiation among farmers, so a certain amount of seed cotton resources begin to flow to individual and private ginning plants, and the purchasing pressure of CCI will be reduced. According to statistics, up to the end of December, CCI has purchased about 6.7 million bales (170 kg each) of cotton in the current season, which is almost twice the amount of cotton purchased in the same period last year.

 

Why does India's cotton price continue to be in the upper channel and set a five-year high? The views of some organizations and cotton related enterprises are summarized as follows:

 

First, since mid December, India's cotton yarn production and sales have been booming (some varieties are even in short supply), and the price has risen strongly, leading to the cotton spot and McX to follow up. Recently, China, Vietnam, Turkey, Bangladesh and other countries have been active in signing contracts for Indian cotton yarn;

 

Second, CCI has continuously raised the reserve price of cotton sales, and the number of daily auctions has declined. The "hunger" marketing has led to the active bidding and taking of goods by international cotton merchants and Indian cotton textile enterprises, forming a support for India's cotton futures;

 

Third, the cotton association of India (CAI) and other institutions proposed to modi government to introduce incentive measures for cotton and yarn exports, so as to enhance the international competitiveness of fancy yarn;

 

Fourth, the impact of the epidemic on India's economy, production, trade and transportation has been greatly weakened. The production capacity of cotton textile and garment enterprises has rebounded in an all-round way (the equipment load of some large and medium-sized manufacturers has reached 85% or even more than 90%), and cotton consumption and demand have been rising. Cai predicts that India's domestic cotton consumption in 2020 / 21 will be 33 million bales, an increase of 8 million bales compared with the previous year, with an increase rate of 32%;

 

Fifthly, the depreciation of Indian Rupee stimulated the export of cotton, cotton yarn and other products, which continued to be good for cotton prices. India's slow recovery from the recession caused by the new coronavirus, the unlimited monetary easing policy of the Federal Reserve and the massive fiscal stimulus package "cutting leeks" one after another, and the passive depreciation of the rupee has become the norm.