Financial Daily from THE HINDU group of publications
Thursday, Oct 28, 2004
Agri-Biz & Commodities
Cotton seen ruling weak until year-end
Mumbai , Oct. 27
COTTON prices are expected to rule weak in the next two months on increased inflows of arrivals, limited buying by mills and weak yarn prices.
In the past one month, cotton prices in the domestic market have weakened by about Rs 1,500-Rs 3,000 per candy (335.62 kg) in active varieties such as Bengal Deshi, J-34, LRA, Sankar-6 and H-4 because of increased inflows into various major terminal markets of northern and western parts of the country.
"Fresh inflows of new cotton on all-India basis have increased to around 50,000 bales daily. And, they are expected to reach the one lakh mark by the end of November, as new arrivals in the Gujarat, Maharashtra, Madhya Pradesh and southern region will increase in the days to come. At present, majority of the arrivals are from Punjab, Haryana, Rajasthan and, to some extent, Gujarat. The quality of new cotton is good," Mr Bhavik Mehta, Director, Soham Cotton Trading Pvt Ltd told Business Line.
"Almost all the leading cotton mills, especially from North and South region, are buyers. They buy only in limited quantities as per their requirement. Since they expect a bumper crop this year, they are not in a hurry to build up inventory," Mr Mehta said.
Cotton yarn prices have gone down by 35 per cent in a short period. Mills have a sizable quantity of yarn on hand as overall off-take is dull. Also, cotton prices were on decline, a local trader said.
"After a continuous bearish trend, markets have steadied at current levels for now in Gujarat. Most people feel the market may move in this range until the arrivals pick up on a large scale by Mid-November," Mr Mitesh Shah of M/s Kanam Cottons, a Gujarat-based broking firm said.
"Cotton prices may decline further in expectation of heavy inflows against limited buying interest by mills," Mr Mehta said.
"Yarn movement has still not picked up as reported by most of the mills. Unless that happens, I do not see a very good buying interest from mills. Apart from that, most of the mills are anticipating a huge crop season. So every consumer is operating on a hand-to-mouth approach. Main buyers in Gujarat were south mills," Mr Shah said.
"I feel the market should remain steady and range bound for next 20-25 days up till the arrivals pick up," he said.
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