Cotton futures showed some recovery during the early part of the week but profit taking increased towards the latter half due to deepening concerns over slowing import demand from China.
China is likely to be the third largest cotton importer, behind Bangladesh and Vietnam. The country was the biggest importer globally a few years back. China is likely to import five million bales of cotton in the current season.
Net weekly export sales of upland cotton from USA fell by 10 per cent for the week ending February 4, comparing from the week before. The export volume however remains up by 22 per cent from the prior four-week average. Increases were reported for Turkey, Colombia, Vietnam, China, Bangladesh and Taiwan.
Though prices can remain weak in the coming days, worsening concerns over lower production and tightening of arrivals in spot market will be restricting the bearish movements in the near term. Plunging cotton prices have turned supportive for active buying in the spot market, which will be positive for the futures market as well.
India’s cotton production forecasts have been reduced 7.4 per cent against the previous year’s production. Cotton arrivals are lagging by almost 30 per cent compared to the previous year. The reason is that farmers are holding cotton in anticipation of higher prices.
