According to feedback from some cotton companies and cotton-using companies, although the recent June/August shipping schedule in Qingdao, Zhangjiagang and other places, the quotations of Indian cotton M 1-1/8 and M 1-5/32 traders in 2019/20 are still as high as 66-66.50 cents/pound, 68.50-69 cents/pound, the price difference with the June/July shipping date of US cotton EMOT./MOT 1-1/8, EMOT 31-3 36 is only 2-2.5 cents/pound , but due to CCI’s latest adjustment to the Indian cotton sales benchmark price and increased discounts, the domestic selling price and FOB quotation of Indian cotton continue to decline, and the competitiveness of Indian cotton has been consolidated and improved.
Industry analysis shows that on the one hand, the cotton purchased and stored by CCI is of relatively high grade and quality. Although the heavy selling at a loss has suppressed MCX and ICE futures, it has also attracted a large number of buyers including China, Bangladesh, Vietnam, etc. On the other hand, the cumulative purchase volume of CCI in 2019/20 will reach 10 million bales (more than 30% of India’s annual cotton production), and the Indian government implements the “rotation of current year” without sufficient storage conditions and funds. Taking into account that the purchase will still be based on MSP price in the new year, and domestic cotton consumption has plummeted and Indian cotton exports are not smooth, the sales pressure of CCI from June to October is very prominent.
So should we sign a contract to purchase Indian cotton now? The author thinks to wait a little longer and buy the dips. First, the domestic epidemic in India has just exploded, and the impact on cotton consumption and cotton prices will be difficult to end in the short term. A correction is still the main tone; second, India’s cotton planting area will increase significantly in 2020. Driven by positive factors such as the increase in MSP and the arrival of the southwest monsoon as scheduled, India’s current cotton planting area has increased by 24% year-on-year, and MCX futures are “under great pressure”; thirdly, even if CCI cuts prices significantly, it will complete nearly 1.7 million tons of cotton sales around October. It is still very arduous; fourth, the China-India border has been tense recently, with frequent physical conflicts, triggering a strong response from public opinion in both countries, and may have an impact on trade, exchanges, transportation, etc. </p
