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Cotton Price Recovery, Results in Higher Acreage This Season

Published: June 16, 2020
Author: Millionaires


Cotton first month futures, which slipped below Rs 15,000 per bale in the first week of May, have recovered more than 12 percent in less than a month. Lockdown in India, US-China bracing for a fresh round of trade war and weak crude dragged the natural fibre prices to their lowest in more than six years.

However, optimism over global demand revival after countries started lifting virus-related restrictions and recovery in crude have led to a steep rise in cotton prices in ICE as well as on the Indian bourse MCX. Against a 12 percent rise in MCX cotton, cotton active contract at ICE has surged by nearly 16 percent in a month.

Apart from under performance of domestic cotton prices, sheer depreciation in Indian rupee has given a competitive edge to Indian cotton exporters over their global peers.

Hence, despite revising lower Indian cotton output to 330 lakh bales against previous estimates of 354 lakh bales, the Cotton Association of India has increased the export forecast for 2019-20 to around 47 lakh bales, which was previously pegged at nearly 42 lakh balesas weakness in the domestic currency may boost export demand.

Ahead of the peak sowing season, an increase in minimum support price of cotton (MSP) government (long staple at Rs 5,825 per quintal and medium staple Rs 5,255 per quintal, up Rs 275 and Rs 260, respectively), rising prices across the globe and good pace of procurement by the Cotton Corporation of India (CCI) is likely to result in higher acreage this season.

CCI as of first week of June procured around 98 lakh bales across the country, which is highest ever quantity procured by the institution.

Target of Indian cotton exports is increased by 5 lakh bales from 42 lakh bales to 47 lakh bales looking favourable conditions for exports as Indian rupee is depreciated by 8-10 per cent which is lending a big support, said the CAI in a statement on Monday.


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