Cotton likely to surge on continuous rainfall: Sharekhan

Sharekhan's report on agricultural commodities

Cotton complex (Includes cotton, kapas, kapaskhali, cottonseed oil cake) A firm tone was witnessed at futures market. Continuous rainfall and good china import figure support the price. Higher domestic and foreign yarn demand support the cotton prices. In June, export registration surged by 72.7% to a record 142,297MT in comparison of same corresponding month during last year. The increase in demand leads to increasing domestic yarn output. The Indian cotton yarn output over the first half of the year, totalled at 658,192MT, 55.4% more versus the same period during last year. Moreover, tighter world cotton balance sheet and firmness at ICE futures also support the prices. India's cotton exports are estimated at about 100 lakh bales (170 kg each) in the 2012-13 cotton season, which is about 20% of the world cotton exports Minister of State for Textiles, India. In US, recent rainfall and expected wet condition in coming weeks, threatening the cotton crop quality and yield prospects. The U.S. is the world’s biggest exporter. ICAC cuts its cotton price forecast by 7 cents per pound to 108 cents per pound on higher world cotton stock. The stock is likely to increase by 1.31MMT to 19.81MMT in expectation of good crop prospects during this year. Meanwhile, the estimated prices imply an upturn from current levels, at 91.10 cents a pound in expectation of good demand from China. The cotton stocks in China is equivalent to a little more than two months of use, consisting 10.8MMT in government’s hand and 1.6MMT in private hands. According to the Ministry of Agriculture, India, the sowing area for kharif cotton crop 2013-14 is surged to 108.52 lakh hectares in comparison of 101.12 lakh hectares in corresponding period during the last year. Outlook: Prices are likely to surge in expectation of crop damage due to continuous rainfall. Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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