According to feedback from some Indian cotton companies and international cotton merchants, although the main ICE cotton futures contract oscillates around the 80 cents/pound mark, the rise in the U.S. dollar index has led to periodic corrections in commodity futures, and the CAI has reduced the total Indian cotton production in 2020/21. The forecast was raised from 35.6 million bales to 35.85 million bales, but Indian MCX futures and domestic cotton prices continued to rebound, and S-6 quotations rose to a new high in the past five years.
Several cotton processing companies and private traders in Gujarat and Maharashtra said that driven by the sharp increase in domestic selling prices and FOB/CNF quotations of lint cotton, the purchase prices of seed cotton in various factories have reached close to It is even slightly higher than CCI’s MSP purchase price (the purchase price of high-quality seed cotton in Kupang has even risen to 6,000 rupees/quintal, while the MSP is 5,825 rupees/quintal), and considering that private cotton companies have slightly lower standards for seed cotton moisture purchase , payment settlement is relatively fast, and farmers have bargaining space, so a certain amount of seed cotton resources begin to be diverted to individual and private ginners, and CCI’s purchase pressure is subsequently reduced. According to statistics, as of the end of December, CCI had purchased approximately 6.7 million bales (each bale weighing 170 kilograms) of cotton in the current season, which was almost twice the amount of cotton purchased in the same period last year.
Why do Indian cotton prices continue to be in an upward channel and hit a five-year high? The views of some institutions and cotton-related enterprises are summarized as follows:
First, since mid-December, not only has the production and sales of Indian cotton yarn been booming (some varieties are even in short supply), but the price has also risen strongly, triggering a big jump in cotton spot and MCX follow up. China, Vietnam, Turkey, Bangladesh and other countries have recently been very active in contracting and purchasing Indian cotton yarn;
Secondly, CCI continues to raise the floor price of cotton sales, and the number of daily auctions has declined. “Hungry” marketing has triggered international cotton Businessmen and Indian cotton textile companies actively bid and acquire goods, which provides support for Indian cotton futures;
Thirdly, organizations such as the Cotton Association of India (CAI) proposed to the Modi government that exports of cotton and yarn Incentive measures have been introduced to enhance the international competitiveness of floral yarns;
Fourthly, the impact of the epidemic on India’s economy, production, trade, transportation, etc. has been significantly weakened, and the production capacity of cotton textile and garment enterprises has fully rebounded (some large and medium-sized The equipment load of manufacturers has reached 85% or even more than 90%), and cotton consumption and demand continue to pick up. CAI predicts that India’s domestic cotton consumption in 2020/21 will be 33 million bales, an increase of 8 million bales from the previous year, an increase of 32%, which shows how optimistic government departments and market sentiment are;
Fifth, the depreciation of the Indian rupee stimulates cotton , cotton yarn and other products are accelerating exports, which will continue to be positive for cotton prices. India is slowly recovering from the recession caused by the new coronavirus, and the Federal Reserve’s unlimited monetary easing policy and massive fiscal stimulus packages are “cutting leeks” one after another. The passive depreciation of the rupee has become the norm. </p
