Cotton gains as yield may suffer owing to the dry spell

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Cotton gains as yield may suffer owing to the dry spell
Credit: © Reuters.

Cotton prices saw a modest increase of 0.23%, settling at 59980. This uptick is attributed to concerns within the cotton trade regarding the potential impact of a prolonged dry spell during August-September and damage caused by the pink bollworm in North India on the cotton yields and quality of the 2023-24 crop (October-September). The cotton acreage for the kharif season is down by 5%, with delayed sowing due to a late monsoon. A clearer picture of the 2023-24 crop is expected by the end of this month, and market watchers are keeping an eye on the selling pattern of raw cotton (tapas).

Daily market arrivals are estimated at around 50,000-55,000 bales, encompassing both the old and new crops. Globally, the cotton industry is grappling with reductions in both production and consumption, as indicated in the 2023-24 Cotton outlook. The U.S. cotton projections for the same period include higher beginning stocks but lower production, exports, and ending stocks. India, on the other hand, is projected to produce between 330 lakh to 340 lakh bales (each 170 kg) of cotton in the 2023-2024 cotton season starting on October 1. In Rajkot, a significant spot market, cotton prices ended at 28413.75 Rupees, showing a gain of 0.51%.

From a technical perspective, the cotton market is witnessing short covering, with a drop in open interest by --2.68 % to 109. Prices have risen by 140 rupees. Key support levels to monitor are at 59880, with potential testing at 59790. On the upside, resistance is anticipated at 60080, and a breakthrough could lead to prices testing at 60190.

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