Cotton Gains on China Demand Revival Hopes and Crop Damage Concern

Cotton candy prices settled down by -0.15% at 57,990, reflecting concerns over potential crop damage due to hurricane Helene last week, but also hopes for a demand revival from China following recent stimulus measures. The USDA has revised India's cotton production forecast for the 2024-25 season down to 30.72 million bales, citing crop damage from excessive rains and pest issues. Additionally, cotton acreage in the current Kharif season is down 9% compared to last year, further weighing on supply. Cotton exports from India for the 2023-24 crop year are projected to rise by 80% to 28 lakh bales, driven by increased demand from countries like Bangladesh and Vietnam. However, cotton imports have also increased to 16.40 lakh bales, compared to 12.50 lakh bales in the previous year.



The Cotton Association of India (CAI) estimates closing stocks as of September 30, 2024, to be 23.32 lakh bales, down from 28.90 lakh bales a year ago. Consumption is estimated at 317 lakh bales, with 291 lakh bales consumed by August end. Globally, the U.S. cotton balance sheet for 2024/25 shows reductions in production, exports, and ending stocks. U.S. production was lowered by 600,000 bales due to lower yields in the Southwest. The global cotton balance sheet also saw cuts, with production, consumption, and trade estimates all revised downward. Notably, world production is down by 1.2 million bales, with decreases in the U.S., India, and Pakistan outweighing a larger crop in China. Global consumption is down by 460,000 bales, primarily in Vietnam, Bangladesh, and Turkey, while global ending stocks were reduced by 1.1 million bales to 76.5 million.



Technically, the market is experiencing fresh selling, with open interest increasing by 5.5% to 115 contracts. Prices fell by -90 rupees, with support at 57,520, and a test of 57,040 is possible. Resistance is likely at 58,460, with a move above potentially testing 58,920.