Cotton fell amid lower demand and expectations for larger yields

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Cotton fell amid lower demand and expectations for larger yields
Credit: © Reuters.

Yesterday, cotton prices decreased by -0.14% to 56880 as a result of lower demand and expectations for larger yields, particularly following the return of the monsoon. Since July 2022, declining demand has become, by far, the biggest issue in the global textile value chain. India is expected to produce 360.2 lakh bales of cotton in CY22/23 as opposed to 302 lakh bales in the previous year, a 19.3% increase. At the end of September, closing stockpiles of cotton are predicted to increase by 420% to 51 lakh bales. Farmers and dealers now have 110 lakh bales, or 28% of the crop, in their possession. They are keeping their expectations for future price increases in check.

Due to lower-than-anticipated demand from textile businesses, China's Ministry of Agriculture lowered its prediction for cotton imports for the 2023–2024 crop year. According to the ministry's monthly China Agricultural Supply and Demand Estimates (CASDE), which is a decrease of 400,000 tonnes from the previous month's prediction, cotton imports are anticipated to total 1.45 million metric tonnes. According to the estimate, consumption would decrease by 100,000 metric tonnes to 7.4 million metric tonnes as a result of poor textile exports and decreased demand from textile producers for raw materials.

The majority of the 1.7 million-bale rise in ending stocks for the global 2023–24 cotton balance sheet may be attributed to higher beginning stocks. Beginning stocks are 1.1 million bales higher due to an expected 1.8 million bale rise in production split throughout India, Brazil, and Australia, which more than compensates an estimated 675,000 bale gain in worldwide consumption and a 350,000 bale fall in Argentina's ending stocks.

Technically market is under fresh selling as the market has witnessed a gain in open interest by 3.76% to settle at 386 while prices are down -80 rupees, now Cotton is getting support at 56560 and below same could see a test of 56230 levels, and resistance is now likely to be seen at 57160, a move above could see prices testing 57430.

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