Cotton prices have further risen in the last week in New York over a short-term speculative move, whereas physical trade was much less enthusiastic. Cotton prices are rebounding on the domestic markets in India and Pakistan while remaining very firm in China.
Cotton prices have further increased in the past week on the international market.
In New York, the nearby contract has risen more than 2 cents per lb or 2.74%. Other contracts have less strongly climbed, with December only gaining 11 cents or 1.4%.
Over the past 4-week period, the nearby has surged more than 5% whereas December was only up 2.4%.
Short-term speculative move
The current rise of New York futures could be due to short-term coverage by speculative funds whereas physical demand is relatively depressed in the current period.
Available yarn inventories could be relatively higher than expected by cotton analysts, which would depress prices on the international market in the coming period.
In addition, cotton use could have been overestimated as the global economy continues experiencing a slowdown.
The end of US-China trade negotiations has also been postponed to April, which is another bearish factor for the international cotton market, meaning that Chinese demand for US cotton will not recover in the very short term.
The rebound of Indian market
On the domestic markets in Asia, cotton prices have remained very firm in the past two weeks, even bottoming out in India.
After reaching a low at 41,400 rupees per candy on Feb 21st, the benchmark indicator has rebounded to 43,000 rupees on last Saturday, a rise of 3.9%.
Daily cotton arrivals from the new crop have suddenly fallen in India, as a clear sign that the output could be lower than expected this season.
The Cotton Association of India (CAI) had already lowered its forecast at the beginning of March.
Demand from China would also have jumped, as Chinese authorities are not expected removing additional tariffs on US cotton before the end of current negotiations with Washington.
Chinese demand has also surged for Brazilian and Australian cotton, as a result.
By contrast, demand from Bangladesh is currently suspended, due to the high level of yarn inventories in the largest cotton importing country.
Indian authorities have also stopped buying cotton after prices have jumped above minimum levels previously set by the government.
Also rising in Pakistan
In Pakistan, a fall of quality cotton available on the domestic market has eventually pushed up prices to higher levels, as demand was rebounding from spinners.
The benchmark indicator has risen to 8,700 rupees per maund on last Saturday.
In China, domestic prices are very slightly rising, but large quantities from the new crop are still available in different parts of the country.
Although demand for foreign cotton is strong, inventories are piling up at bonded warehouses.
Import quotas are delivered on a quarterly basis this year and many companies have too rapidly exhausted their rights for importing cotton under 1% tariffs.
Authorities are not expected releasing additional quotas before the end of trade negotiations with Washington.
Source: Emergingtextiles
