In the week ending January 11, 2014, farmers and ginners in India held to their cotton without any fear of downtrend, says a weekly report on cotton market trends released by S. Ajay Kumar & Company.
During the week, cotton market in India experienced a lot of resistance from foreign futures and strong rupee, and ginners held on to their inventories, according to the report.
At the close of the week, farmers held 10 million bales of raw material while ginners had another 2.5 million bales either in raw form or in fully pressed form.
At the start of the week, the price of Shankar 6 variety of cotton was Rs. 40,500 per candy of 355.6 kg each, while the price at the close of the week increased to Rs. 42,000 per candy.
During the week, the Indian rupee became stronger compared to the US dollar, and both Indian futures and physical prices rallied showing bullish trend.
“It shows strength and holding power of Indian farmers and ginners,” the report states and adds that “It is a lesson for the industry not to under estimate strength of united Indian cotton growers.”
Analyzing the prices, the report says that Indian cotton is overvalued due to strong mood of farmers. At present, the price of Indian cotton is greater than the price of African cotton and equal to the US cotton.
In such a situation, it is not viable for Indian cotton traders to compete in international market. Moreover, Indian rupee is appreciating. So, it would be more viable for Indian spinners to import cotton rather than buying domestic cotton.
Technically, New York Board of Trade (NYBOT), a physical commodity futures exchange, is on down swing, so imported cotton is expected to become cheaper in the ongoing week ending January 18, 2014.
Although the Indian cotton market rallied for short-time, the report predicts strong resistance in the market and again it will touch Rs. 40,000 per candy level.
