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Tuesday, May 28, 2024

Pressure on cotton prices as mill demands slow amid low global yarn demand

Cotton candy prices experienced a marginal decline of -0.38 percent in India, settling at 57140, influenced by sluggish milling demand amidst muted yarn demand in the global market. Prospects of a better crop in countries like Australia added further pressure to prices.

However, the downside remained limited as India continued to witness strong demand for cotton from buyers in nations like Bangladesh and Vietnam. The International Cotton Advisory Committee (ICAC) projected increases in the cotton-producing area, production, consumption, and trade for the upcoming season, indicating optimism in the cotton market.

India’s cotton stocks are anticipated to decline significantly in the 2023/24 marketing year, reaching their lowest level in over three decades, owing to lower production and rising consumption. This decline is expected to limit exports from India, the world’s second-largest producer, supporting global prices.

However, it may also impact domestic prices and weigh on the margins of local textile companies. Looking ahead to the 2024/25 marketing year, India’s cotton production is estimated to decrease by two per cent due to farmers shifting acreage to higher-return crops. Conversely, mill consumption is forecasted to increase by two per cent as yarn and textile demand improves in major international markets. Import duties on extra-long-staple cotton have been rescinded, leading to a projected 20 per cent increase in imports.

From a technical standpoint, the market indicates long liquidation, with a drop in open interest and a price decline. Support levels are identified at 57000, with potential tests at 56850, while resistance is anticipated at 57300. Traders should monitor demand trends, production forecasts, and international market dynamics for insights into future price movements in the cotton candy market.

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