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Tight supply likely to herald cotton price rally

Due to short supply and improved exports as well as demand from domestic mills, prices of cotton may touch Rs 43,000 per candy by end of January. The price of the commodity has already surged 10 per cent to Rs 41,500-42,000 a candy in last two weeks. According to industry sources, daily arrival of cotton, which should have been more than 225,000 bales (a bale of 170 Kg), is about 150,000 bales. Everyone is trying to meet their export shipment deadlines and domestic demand and prices remain firm. Traders and ginners aver that farmers want cash rather than cheques and that's why they are holding the crop.

Bhagwan Bansal, President, Punjab Cotton Ginners Association says price of cotton have gone up due to short arrival and good demand from domestic mills and exporters. It may continue to increase further as there is no hope for rise in supply in the near future and pipeline is still dry. Due to cash shortage, farmers desist to bring raw cotton in the mandis across India. Kapas prices are ruling in a range of Rs 1,100-1,160 per 20 kg. According to Bansal, cotton prices may go up to Rs 43,000 per candy in the next one month if supply doesn't improve.

Exporters have no choice but to buy at any cost as they have to fulfill prior commitments. According to the exporters, they have not made forward contract for February and March in this season, because of the constant rise in the cotton prices.