Cotton prices in the domestic market have risen sharply on the MCX in the last few days. Here is how you trade in the commodity over the next few months?
Delay in the onset of monsoon has decreased sowing of cotton seeds, says Ajay Kedia, MD of Kedia Commodity. The poor sowing and huge drop in the prices last year have led to the farmers sowing more remunerative crops such as oilseeds and soybean. Owing to delay in monsoon rains in the sowing current season, till July 5, the cotton sowing decreased up to 8 per cent.
Kedia adds that cotton futures price can go up to Rs 21,600-21750 in 10-15 sessions and it is likely that cotton prices at MCX can reach Rs 23,000-23,500 in 2-3 months.
The commodity price on the MCX is trading around Rs 21,200 level.
Farmers preferred oilseed-pulse crops to cotton crops after getting higher returns for the crop, says Bairan lawyer, CEO of Paradise Commodity.
“The farmers have reduced the cotton acreage due to delayed monsoon. The government has increased the minimum support price for the current Kharif season by 2 per cent. Meanwhile, the MSP of groundnut and soyabean has been increased by 5 to 9 per cent. The change in MSP as led the farmers to perceive that they shall be able to get high rate of return from crops like soyabean. However, in the long term the price of cotton on MCX can go up to Rs 24,500,” he added.
Harish Gallipelli, Research Head (Commodities and Currency) of Inditated Derivatives and Commodities, said that during the next season, there shall be an estimated decline in the production of the commodity.
“If there is some decline in the cotton prices from the existing level, then make a purchase,”Gallipelli said, adding that shopping in cotton contracts of MCX on June 21, around Rs 21,000 can be favourable. In the next 8-10 sessions, Cotton July futures can show a surge in the bracket of Rs 21,500-21,650.
The Cotton Advisory Board (CAB), which is under the Ministry of Textiles, has projected the decline in cotton production in India. In 2018-19, there was a production of 27 million bales. CAB has projected production of 3.61 million bales for 2019-20. A lump of cotton is 170 kg.
Source: Economic Times