The cotton market is seeing mixed influences from global and domestic factors, resulting in a slight price rise. The CottonCandy prices settled 0.54% higher at ₹53,780, benefiting from India’s crop production revisions and continued demand from the garment industry.
Key points contributing to the market dynamics include:
- India’s Upward Crop Revision: The Cotton Association of India (CAI) raised its production estimate for 2024-25 by 2 lakh bales to 304.25 lakh bales, largely due to higher output in Telangana (+6 lakh bales). However, this is counterbalanced by an expected decline in North Indian production, with Punjab, Haryana, and Rajasthan seeing a sharp 43% drop in kapas arrivals by November-end.
- Strong Domestic Demand: Despite the increased production, the demand for cotton remains robust, especially in South India, where cotton yarn prices are rising due to strong export orders and higher consumption estimates, projected at 315 lakh bales.
- Brazil’s Production Cut: On the global front, Brazil revised its 2024-25 cotton production forecast down to 3.79 million tonnes from 3.83 million tonnes, primarily due to reduced acreage in Mato Grosso, a major cotton-growing region. This decrease in Brazil’s forecast adds to the pressure on global cotton supply.
- Global Production Outlook: According to the WASDE report, global cotton production is expected to increase by 1.2 million bales to 117.4 million bales, driven by higher output in India and Argentina, which could help mitigate the impact of Brazil’s lower production.
- Stable Exports: India’s December-end cotton stocks were reported at 85.04 lakh bales, with exports estimated at 7 lakh bales, indicating stable overseas demand for Indian cotton.
From a technical perspective, the market is under short covering, with no change in open interest at 268 lots. The support and resistance levels are also interesting: support is seen at ₹53,780, and any break below this level could test it again. On the upside, resistance is at the same ₹53,780 mark, and a move above this could push prices higher.
The market appears to be in a consolidation phase, with a mix of positive domestic factors and global concerns, making it crucial to monitor how these influences evolve in the coming weeks.
