Cotton prices may not shrivel in long run

MUMBAI: Cotton prices are unlikely to come down in the long run despite the projection of good domestic production in 2007-08. This is because of a shortfall in global cotton production and increased domestic demand. "There can be marginal fall in prices, but since there is reported to be 20% fall in cotton production by the US and domestic demand for yarn is showing a 10% growth, cotton prices will not fall," textile commissioner J N Singh said.

India is expected to harvest more than 300 lakh bales of cotton in 2007-08 with increased acreage and yield against 280 lakh bales in 2006-07, according to estimates by the Cotton Advisory Board. The anticipated US crop size is 17.3 million bales for 2007-08 against 21.6 in 2006-07, according to the August report of USDA.

The most liquid raw cotton variety, NCDEX Kapas, March 2008 contract on Monday closed up at Rs 430.20 per 20 kg against the previous close of Rs 424.8. Cotton prices of the Shanker6 variety has gone down to Rs 19,500 per candy from Rs 20,500 per candy levels in past one month. NCDEX spot prices of 28.5 mm variety have gone down from Rs 20,600 in August to Rs 20,560 levels in start of September.

East India Cotton Association president K F Jhunjhunwala said prices are subdued at current juncture and there is very little buying, as cotton year ends in September. "Prices will not be bearish internationally and even domestic prices will not go down in the long run," Mr Jhunjhunwala said.

Fresh cotton arrivals would start from mid of October in India, though some arrivals have started from north. Cotton arrival starts from north followed by central and south regions.