Cotton spot prices in India, the world's second-largest producer, are likely to fall sharply in November with supplies from the new crop expected to surge, although buying from domestic mills could underpin levels in the short-term.
Prices in domestic markets have fallen nearly 8 percent since September 15 as harvesting started, bringing more supplies to markets. Aggressive buying by textile makers, who were holding back on purchases to wait for supplies from the new season crop, is steadying prices currently. "Mills, buying in large quantities due to a rise in clothing demand in the ongoing festival season, are likely to slow down their purchases in November and this could also depress prices," said Ritesh Agrawal, a trader based in Kolkata.
Indians will celebrate Dussehra this month and Diwali in November. Demand for textiles rises during festivals as people buy new clothes for the celebrations. Added pressure on prices comes from an expected decline in exports. China, the world's largest consumer and India's biggest buyer, is likely to cut imports by over 50 percent to trim bulging stocks.
Lacklustre buying by exporters due to softening global prices is also putting pressure on local prices. Global prices have been falling sharply on waning world demand and an expected rise in global output. The December cotton contract in New York is down about 20 percent since April 1, when farmers in the United States started planting.
On Tuesday, the most-traded domestic spot Shankar-6 variety closed flat at 33,100 Indian rupees per candy of 356 kg (around 80 cents per lb), data from the Cotton Association of India showed. Spot market prices are available in the evening. The November cotton futures contract on the Multi Commodity Exchange (MCX) was up 1 percent at 16,110 rupees per bale of 170 kg (about 80.3 cents per lb) on Wednesday.