MONTHLY REPORT ON 08February,2021

( FEBRUARY )

COTTON

Fundamental factors:

• In the international market, index funds rolled over their positions from the front-month contract, precipitating a pullback from a more than two-

year peak.

• Alongside the simple reopening process, the strength of fiscal and monetary stimulus has been credited with pulling the U.S. economy to

record quarter-over-quarter growth in the third quarter. Later in the year, as more vaccines are given, expectations are that growth will

accelerate, which shall increase the demand of this fibre crop.

• Back at home, a 10% import duty was imposed on cotton imports in the Union Budget. On the contrary, basic customs duty on man-made

fibres (MMF) such as caprolactam, nylon chips and nylon fibre and yarn were cut to 5% from 7.5% in the budget.

• In the domestic market, prices are getting support from the ongoing procurement. As per data from Ministry of Agriculture, the procurement

operations of seed cotton (Kapas) under MSP are going on smoothly in the States of Punjab, Haryana, Rajasthan, Madhya Pradesh,

Maharashtra, Gujarat, Telangana, Andhra Pradesh, Odisha and Karnataka. Till 03.02.2021 a quantity of 90,39,092 cotton bales valuing Rs.

26,432.54 Crore has been procured benefitting 18,67,429 farmers.

• In days to come, the uptrend in cotton futures on MCX is expected to remain intact owing to bullishness prevailing in the ICE cotton

futures. Hence, any dip around 21100-21000, can be taken as an opportunity, eyeing a target of 22500.

• Investors are banking on a bullish supply-demand outlook from the U.S. Department of Agriculture (USDA) on Feb 9.

• Investors were also keeping close watch for developments on the U.S. fiscal stimulus measures. The U.S. Senate on early Friday passed a

budget plan that would allow for passage of President Joe Biden's $1.9 trillion COVID-19 relief package in coming weeks without Republican

support.

• The International Cotton Advisory Committee (ICAC) has projected 2020/21 world aggregate production at mere 110.16M bales, with most

reductions expected in major cotton spinning nations.

• The demand seems to be steady as its weekly export sales report, the U.S. Department of Agriculture (USDA) showed that net sales of

286,700 running bales (RB) for 2020/2021 were down 11% from the previous week, however sales increased for China at 85,400 RB. The

report showed that exports of 319,000 RB were up 16% from the previous week, of which 106,500 RB were shipped to China.

WeeklyPricemovementofCottonFutures(ICE&MCX)

Source:Reuters

Ÿ Reviving world economy after vaccinations

Ÿ Ongoing procurement by Govt. agency

Ÿ Prospects of more exports

Ÿ Higher demand from domestic mills, ahead of summer

season.

Factors to watchŸ Bullish trend of ICE cotton futures; making 2 year high

Ÿ Hopes of U.S stimulus; sentiments optimistic

PRICERANGEMCX:21000-22500(Rs.perBale)

ICE:80-87(CentsperPound)

Heatmap&SeasonaltableofCottonfutures(MCX)WeeklySpotPriceChartofCotton(Kadi)

Source:ReutersSource:Reuters

COTTON

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IMPORTS

The estimate of the cotton imports into India has been maintained by the CAI at the same level as estimated in the previous month i.e. at 14.00

lakh bales of 170 kgs. each (equivalent to 14.88 lakh running bales of 160 kgs. each) which are less by 1.50 lakh bales of 170 kgs. each from

15.50 lakh 5 bales of 170 kgs. each estimated for the 2019-20 crop year. Upto 31st January 2021, about 6 lakh cotton bales of 170 kgs. each are

estimated to have arrived the Indian Ports.

EXPORTS

India’s Cotton Demand-Supply latest estimates

CONSUMPTION

The Cotton Association of India (CAI) has retained its consumption estimate for the current crop year at the same level as estimated in the last

month i.e. 330.00 lakh bales. The consumption for the previous season was estimated at 250 lakh bales due to the disruptions caused on account

of COVID-19 Pandemic. Consumption is now expected to reach the pre-lockdown level of 330 bales during the 2020-21 Season. Upto 31st

January 2021, the consumption is estimated at 110 lakh bales of 170 kgs. each (equivalent to 116.88 lakh running bales of 160 kgs. each).

The CAI has estimated the cotton exports for the 2020-21 Season at 54 lakh bales of 170 kgs. each (57.38 lakh running bales of 160 kgs. each)

against the previous year’s export estimate of 50 lakh bales of 170 kgs. each (53.13 lakh running bales of 160 kgs. each) Upto 31st January 2021,

29 lakh bales of 170 kgs. each (30.81 lakh running bales of 160 kgs. each) are estimated to have been shipped.

ARRIVALS

Indian cotton arrivals during the months of October 2020 to January 2021 are estimated at 255.25 lakh bales of 170 kgs. each which are

equivalent to 271.20 lakh running bales of 160 kgs. each.

PRODUCTION

The CAI has maintained its cotton production estimate for the season 2020-21 at the same level as estimated previously i.e. at 360 lakh bales of

170 kgs. each (equivalent to 382.50 lakh running bales of 160 kgs. each. The crop estimated now for 2020-21 Season is at the same level as

estimated for the previous year.

CLOSING STOCK AS ON 30TH SEPTEMBER 2021

Closing stock as on 30th September 2020 is estimated by the Committee at 115 lakh bales of 170 kgs. each which is equivalent to about 122.19

lakh running bales of 160 kgs. each.

STOCK AS ON 31ST JANUARY 2021

The cotton stocks held by mills in their godowns on 31st January 2021 are estimated at 75 lakh bales (equivalent to 79.69 lakh running bales of

160 kgs. each). The mills have on an average about 82 days’ cotton stock in their godowns. The CCI, Maharashtra Federation, MNCs, Ginners,

Traders. MCX, etc. are estimated to have the total stock of about 172.25 lakh bales of 170 kgs. each as on 31st January 2021 which is equal to

about 183.02 lakh running bales of 160 kgs. each. Thus, the total stock held by spinning mills and stockists on 31st January 2021 is estimated at

247.25 lakh bales of 170 kgs. each which is equal to about 262.70 lakh running bales of 160 kgs. Each

Vandana Bharti (AVP - Commodity Research) Boardline : 011-30111000 Extn: 625 vandanabharti@smcindiaonline.com

Subhranil Dey Sr. Research Associate (Agro) Boardline : 011-30111000 Extn: 674 subhranildey@smcindiaonline.com

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