Bearish outlook for cotton in next season

NAGPUR: Traders are having a bearish outlook for cotton for the next season. Trade sources said given the anticipation of a higher acreage this year, rates may be remain around Rs 4,500 a quintal or may touch Rs 5,000 level temporarily towards the end.
October futures in the global market are being quoted at 147 cents a bale, which translates into Rs 4,500 a quintal at home. The crop arrives in October after which it may go up to Rs 5,000 by April when the output is almost exhausted, said Manubhai Shah, a director of the Surendra Nagar Cotton Oil and Cottonseeds Association. "Although the trends will finally depend on the monsoon, the sowing data show that the boom would not be repeated. The farmers can be still better off than earlier years when the rates were between Rs 1800 to Rs 2300 a quintal," he added.
The trends in domestic exchanges show a bearish trend. The April 2012 futures are being quoted at Rs 900 per 20 kgs which makes it Rs 4,500 a quintal. This indicates that the rates may not go up even at the end of the season, said an analyst from Mumbai. Farm activist Kishor Tiwari of Vidarbha Jan Andolan Samiti said even though Rs 4,500 was on lower side, it would be still favourable for the farmers if the rates remained stable throughout the year.
Capitalizing from the sudden fall in cotton rates, the textile lobby too is bargaining harder. Millers acting in concern are ready to buy the lower grades of lint (processed cotton) from traders only at deep discounts. Normally the difference between best and the average quality of lint does not exceed Rs 5,000 per candy (365 kgs). In the current situation the textile lobby has stretched the gap to Rs 10,000, say cotton traders in the region. Since the traders are fetching a lower rate for lint, farmers too are being offered less for raw cotton, said Premkumar Taori, a trader from Dhamangaon.
The current fall has been triggered by global cues of higher output both in India and China. The news led to a sudden downtrend in the exchanges. Speculators fearing losses squared their positions by selling, instead of rolling over the contracts that triggered the fall. Selling pressure by traders who had held up their stocks hoping to get better rates also took its toll on the prices. Now, if the government allows exports, it would tighten the supply in the country and help revive the rates.

(Source: http://timesofindia.indiatimes.com/city/nagpur/Bearish-outlook-for-cotton-in-next-season/articleshow/8051299.cms)