Weekly Report: India Cotton Maintains Uptrend On Bullish Outlook

MUMBAI (Commoditiescontrol) - As predicted in the last week’s report (29th August), cotton prices in domestic markets traveled upside during the week ending 5th September, 2015 at the back of active trading by market players.

In north India, rates gained Rs 30-40/maund (37.3kgs each) during the course of the week. Similarly, prices moved up Rs 500-900/candy (356kgs each) in Gujarat, while prices displayed positive movement of Rs 100-400/candy in Maharashtra and Madhya Pradesh.




Improved buying interest by domestic mills and spinners supported prices throughout the week. In the beginning of the week, buyers were seen active on spot markets due to tight availability. Cotton Corporation of India (CCI) also received strong buying at its auctions. The government nodal agency sold 563,760 bales out of 507,360 bales offered to sell throughout the week.



Factors Holding Prices Firm

1.Deficient Monsoon
Deficient southwest monsoon rainfall is one them. Central India has been receiving deficient rainfall from the last many days compared to other parts of the country. Poor monsoon rains in Maharashtra’s Marathwada Vidarbha region, Telangana, Karnataka and Andhra Pradesh this year. Monsoon rains have given a miss to the area by being deficient during most of July and now in August also. If not revived lately, crop in the state will have to face sever damage.

2.Lower World 2015-16 Cotton Output By ICAC
Just after lower crop estimates by Cotton Association of India (CAI) and a group of market analysts, International Cotton Advisory Committee (ICAC) released its September forecast in which it lowered global cotton production for 2015-16. For the year, the ICAC has pegged world cotton production at 23.7 million tons down 9.15 percent year on year (YoY). Last year same month, it had estimated world output at 26.19 million tons.

Global cotton consumption has marginally raised by 2.29 percent to 25.03 million tons compared to 24.47 million tons in the corresponding period last year. This puts world ending stocks down 6.1 percent to 20.4 million tons. But consumption estimate remains below the volume consumed just before the global economic recession.

China has an important role to play in the overall cotton market. High domestic cotton prices and low polyester prices in China have made its cotton spinning sector less competitive.

In addition to China, India and Pakistan are the largest consumers of cotton and these three countries alone account for 64 percent of world cotton consumption. Consumption in India and Pakistan is anticipated to increase by 3 percent, to 5.6 million tons and 2.6 million tons respectively.

3.Crop Loss Fear Due To Whitefly Attack
Cotton crop in many areas in Punjab, Haryana and Rajasthan, the three major cotton producing states, is under serious threat of whitefly attack. The uncontrollable issue has raised concerns about serious loss to next crop, in terms of quantity and yield. In Fazilka district of Punjab, nearly 40 per cent of the standing cotton crop has been affected by the whitefly attack, making it one of the worst-hit districts of the state. Nearly 99,000 acres under cotton cultivation have been affected by the insect attack, as per sources. Standing crop in about 700 acres have been ploughed out by farmers. Even as the state government has announced that it would provide adequate compensation to cotton growers, possibility of lower crop from the state cannot be ruled out. But yes, this move by the government would benefit the growers. The government said that farmers will provided with compensation for damages caused by whitefly attack and other natural calamities.

4. Slow Arrival Of New Crop
Though, new crop has started arriving in north Indian and few south markets, quantity is limited as of now. This week, around 25-30 quintals of new cotton crop have arrived in few markets of Punjab. There are talks in markets that daily arrivals of new crop throughout the country will be at around 8,000-10,000 bales in the beginning. As a result, textile mills may remain bullish in the sessions to come as the new arrivals will not be enough to meet their daily requirement.

5.Positive Movement In Yarn Market
Since last week, yarn market has been witnessing positive tone amidst improved demand buying interest by domestic mills. During this week, yarn prices have posted gains of Rs 1-3/kg. According to market sources, Indian cotton yarn prices remained firm due to improved demand in domestic markets. Also, polyester yarn prices remained stable in the past week after continuous decline. Besides, industry experts believe that India would continue to receive regular demand for yarn from China in the new season, despite chances of cotton purchase by China remains grim.

6.Fall In Sowing Figures
Sowing area under cotton is constantly shrinking, indicated by government figures. Missing rains over most of the major growing regions have put a roadblock for farmers to sow the crop in their fields.

So much so that, Indian Cotton Federation (ICF) said that poor monsoon pattern in India may force cotton farmers to shift their focus to other cash crops. To go with the talks in the markets and considering reports of weather offices, India is going to witness worst drought season since 2009.

According to the central government data, all India cotton sowing area reduced to 114.7 lakh hectares as on 4th September, 2015 compared to 123.7 lakh hectares in the corresponding period last year.

Below is the state wise cotton sowing data as on 4th September, 2015:

WEEKLY WEATHER ROUNDUP:

Rainfall Remains 17% Below Normal This Week, Northwest India Driest
The country as a whole received below normal rainfall of 17 percent during 27 August-2 September. The northwest part of India received least rainfall of 8.1MM against normal rainfall of 37.4MM, a deficit of 78 percent.

Central India recorded rain deficit of 28 percent with actual rainfall of 44.3MM compared to normal rainfall of 61.4MM.

During the week, South Peninsula received rainfall of 20MM against normal rainfall of 35.2MM, with an overall deficit of 43 percent.

However, rainfall over east and northeast India exceeded normal rainfall figure of 68MM, with actual rainfall of 128MM.

For the country as a whole, cumulative rainfall during monsoon season has so far up to 2nd September, 2015 been 12 percent below the Long Period Average (LPA). Rainfall activity was less than normal in all the broad homogeneous regions of India except for east and northeast India, where it was near normal.

Forecast For Next Week:
Conditions are becoming favorable for withdrawal of southwest monsoon from parts of northwest India towards end of the week.




Weekly Technical Update
MCX Cotton Bales Weekly (Price are in INR (Rs)/Bales)

NCDEX Kapas April’16 Weekly: (Price are in INR (Rs)/20 Kg)

NCDEX COC September :( Price in Rs/Quintal)

U.S. MARKET THROUGH THE WEEK





SPECIAL COVERAGE THROUGH THE WEEK

India To Receive Regular Demand For Cotton Yarn From China - Vardhman Group
Chinese demand for Indian cotton is likely to remain weak in next marketing season 2015-16 because China has large stock of cotton. But India will receive regular demand of cotton yarn from China. Mr. I. J. Dhuria, Director (Material) Vardhman Group, in an exclusive interview with commoditiescontrol.com explained why he is optimistic. He also spoke on various issues related to cotton in next season (Click Here For Full Report)

India’s Cotton Exports May Rise 21% In 2015-16, Says ICAC
After falling as much as 51 percent in 2014-15, cotton exports by India are likely to rebound by 21 percent to 1.2 million tons in 2015-16, as per International Cotton Advisory Committee (ICAC). Though reduced buying by China, the world’s top consumer of the fibre, has noticeably depressed the overall Indian export figures in the current season, which is coming to an end shortly. And chances of any rise in the total estimated figures is very unlikely now (Click Here For Full Report)

China Reserve Cotton Auctions End; Sells Just 3.4% Of Total Offer
As the state reserve cotton stock auctions by China came to an end Monday, it is reported that the country sold only 63,412 tons of cotton, just 3.4 percent of the total offered. Officials had earlier said that they were estimating to offload as much as 1 million tons through state reserve auctions from the massive stockpile of around 11 million tons. On the other hand, industry had expected that around 300,000 tons of cotton could be sold out to domestic mills (Click Here For Full Report)

USDA Rates U.S Cotton Crop 11% Poor/Very Poor
The U.S. Department of Agriculture (USDA) in its weekly crop progress report for the week ended 30th August, 2015 stated that U.S. cotton crop condition stood 11 percent very poor/poor, slightly higher that previous weeks. The department rates 54 percent crop in good/excellent condition compared to 53 percent last week (Click Here For Full Report)

ICE Dec On-Call Cotton Sales Drop; Purchases Rise - CFTC
ICE cotton on-call sales in most-active December contract reduced 1,816 contracts to 20,745 contracts. On-call purchases increased 288 contracts to 12,525 contracts during the week ended 28 August, as per CFTC report. ICE cotton on-call sales in March contract also jumped 274 contracts to 17,177 contracts. On-call purchases increased 1,709 contracts to 2,817 contracts (Click Here For Full Report)

Brazilian Cotton Stays Firm; Delayed Harvest, Strong Dollar Support
Brazilian cotton prices continue to trade on the upside amid spurt in exports, restricted availability in domestic markets and delayed harvest. Brazilian sellers strengthened the accomplishment and closure of export contracts in August, motivated by the strong dollar. At the same time, Brazilian cotton is competitive in the international market (Click Here For Full Report)

TOP STORIES THROUGH THE WEEK

India Rainfall May Be Below 88% Of LPA
India is likely to witness driest year since 2009 given the forecast of monsoon rains to be below 88% of long-period average (LPA). The forecast by Indian Meteorological Department (IMD) raised concern about fall in farm output. The World Meteorological Organization said that El Nino phenomenon will peak between October and January.

Whitefly Damages Nearly 40% Of Cotton Crop In Fazilka
Whitefly attack has damaged around 40 percent of cotton crop in Fazilka of Punjab, making it one of the worst-hit district in Punjab. Nearly 99,000 acres under cotton cultivation have been affected by the insect attack, as per sources. Standing crop in about 700 acres have been ploughed out by farmers.

September Rains May Enhance Losses To North Cotton
Farmers in Muktsar district of Punjab are worried about September rains which may further damage standing crop of cotton. The growing crop does not need rains at the moment. As it is, cotton crop in the district has suffered 30 to 35 per cent damage due to the whitefly attack.

New Cotton Crop Arrivals Begin In Punjab
Around 25 quintals of new cotton started arriving in Punjab’s Mansa, Sunam and Bareta. Narma kapas is reportedly quoted in the range of Rs 4,125/50. As per initial reports, around 20-25 percent of cotton crop in under whitefly grip in Punjab and Haryana.

Cotton Crop In Gujarat Must Get Rain In Next 10-15 Days
Cotton crop condition in Gujarat can be considered good so far. But if it fails to receive rains in next 15-20 days, then it will be a matter of concern. Already, deficient rains have resulted in cases of disease and pests. Agri experts said that kharif crops are in need of more rains or else further damage can be caused.

Indian Textile Industry Urges For Subsidy Under TUFS
The textile industry has been facing issues in getting subsidy under the Technology Upgradation Fund Scheme (TUFS). Some member-units had applied for subsidy under the scheme which is pending for the past one and a half years.

CICR To Produce ‘Straight’ Varieties Of Cotton
The Central Institute of Cotton Research (CICR), Nagpur, said that it will produce ‘straight’ varieties on a mass scale this year onwards. CICR has developed 21 varieties using cry1Ac but its commercial launch was held up for want of clearance from Genetic Engineering Appraisal Committee (GEAC).

Officials Asked To Arrange Meeting With CCI
Adilabad forest minister has asked officials of marketing department to arrange meeting with Cotton Corporation of India (CCI) on September 5 or 6. The Minister said that CCI will be a major player in cotton trading in the new season. He has asked officials to be prepared in advance for the upcoming trading season.

Agreement For Developing Indigenous BT Cotton Signed
Tamil Nadu Agricultural University and Central Institute for Cotton Research (CICR) entered into agreement for developing indigenous BT cotton. TNAU in collaboration with CICR, Nagpur, will further work on the development of indigenous BT cotton. Boll worm infestation was a serious problem causing enormous yield loss in cotton.

Poor Monsoon May Force Indian Cotton Growers Shift Focus - ICF
Indian Cotton Federation (ICF) said that there are high chances that poor monsoon may force cotton growers in India to look for other cash crops. Farmers in Guntur, Marathwada, some areas in Karnataka and few areas in Saurashtra have suffered badly due to delay in monsoon rains. But as per ICF, farmers getting diverted to other crops is a good thing considering the huge carry forward stock. The ICF estimates total cotton output in 2014-15 at around 388 lakh bales.

Cotton Growers In Punjab To Be Compensated Adequately
Harsimrat Kaur Badal, Union Minister for Food Processing Industry, said that cotton farmers will be adequately compensated for the losses incurred due to natural calamity. She said as per the orders of Chief Minister, special girdawari of the affected farmers’ fields was being conducted and soon after the survey was completed, the farmers would be awarded compensation.

Hosiery Industry Delegation Meets Textile Commissioner
A Team Of Hosiery And Textile Industry Has Met Textile Commissioner, Ambika Soni Today To Bring To Her Notice The Various Issues The Industry Is Facing In availing The TUFS. The Team Told That Some Member-Units Had Applied For Subsidy Under The Scheme Within The Specified Time Of One Year From The Date Of Sanction. However, Due To Some Delay At The Textile Commissioner's Office, These Could Not Be Punched Into The System For UID Creation Within The Stipulated Time Period.

China’s ELS Cotton Output To Surge In 2015-16
China’s extra-long staple (ELS) cotton output could be three times last year's crop in 2015-16. If achieved, prices and demand can come under pressure global exporters like the United States. ELS acreage hit 1.9 million mu, equivalent to 127,000 hectares, reported a news agency last week, up from less than 1 million mu last year.

TCP Facing Difficulties In Offloading Cotton
Trading Corporation of Pakistan (TCP) received poor response in the fourth cotton tender as only two bids were submitted for procurement of 4,600 bales against the offered quantity of 88,600 bales. So far, cumulatively, TCP has conducted four tenders for the sale of 95,400 cotton bales (crop year 2014-15), of which, two tenders have been scrapped by the state-run grain trader as bids were lower than the reserve price. Some 10,800 cotton bales have been sold through remaining two tenders. In response to the fourth tender, opened on August 31, 2015. Only two parties participated and submitted five offers for procurement of 4,600 cotton bales against the offered quantity of 88,600 bales.

TCP To Disclose Price Of Cotton Before Tender Opening
TCP decided to reveal reserve price of cotton before opening tender. Slow offtake and cancellation of previous two tenders forced TCP to take this decision. Fifth cotton tender for sale of 84,600 cotton bales will be opened on September 14, 2015. Parties can inspect cotton on Sept 10 at the TCP's Pipri Godown.

CCAC Lowers Pakistan 2015-16 Cotton Output To 13.59 Mln Bls
Cotton Crop Assessment Committee (CCAC) has revised down estimate on Pakistan’s 2015-16 cotton output to 13.59 million bales, down 12 percent from 15.49 million bales forecast earlier. The committee has lowered its production estimate owing to heavy rains and floods damaged the crop. The Federal Committee on Cotton (FCC) had set cotton target for 2015-16 at 15.49 million bales from 7.7 million acres.

Pakistan Business Community Upset With Govt
Islamabad Chamber of Commerce and Industry (ICCI) said that Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has not consulted it while incorporating the recommendations in the new policy framework. The Ministerial Committee approved the three-year strategic trade framework policy without consultation with the private sector and identifying factors affecting exports. Also, the government had earlier determined to set the target of $50 billion exports by 2018, but it was revised to $35 billion.

Pak’s Textile Min’s Proposal For Procurement Of Cotton Through TCP Rejected
Finance and Commerce ministries of Pakistan have rejected Textile ministry’s proposal for procurement of seed cotton through Trade Corporation of Pakistan (TCP), reports Business Recorder. The proposal has been termed it impractical due to several operational reasons and estimated financial loss of up to Rs 13 billion to the public exchequer. During 2014-15, due to fluctuating international lint prices, cotton growers suffered badly; average seed-cotton price during cotton picking season last year remained below the average cost of production calculated by Punjab Cost of Production Committee. It is expected that the cotton price trend during this year (2015-16) will not be much different from the previous year, which means that farmers cannot expect a fair return for their cotton crop.

OUTLOOK FOR NEXT WEEK
Commoditiescontrol.com see cotton prices trading upside Rs 300-500 in the next week on sustained demand amid positive sentiment. However, prices are likely to stabilise at that level for the near-term. Further significant rise in prices is uncertain as new crop has started arriving in markets, though in limited quantity. It is surely going to check price rise. At the same time, there are reports of traders selling cotton (purchased from CCI) in physical markets at current higher rates. Also, ongoing economic turmoil in China, leading consumer in the world, will likely limit upside.

As far as yarn market is concerned, major movement is expected on domestic mills demand prospect.

(By Commoditiescontrol Bureau; +91-22-40015532)