TMN - Cotton

Cotton Market Dips: An In-depth Analysis

Quick Look

  • Cotton prices decreased by 0.81%, closing at 61,480.
  • Increased production forecasts by CCPC and Cotton Australia add to supply.
  • Lower demand from mills and concerns over domestic prices impacting exports.
  • Technical analysis suggests support at 61,200, with resistance at 61,900.

Yesterday witnessed a notable dip in cotton prices, marking a decline of 0.81% to settle at 61,480. Yesterday saw a significant decrease in cotton prices, with a fall of 0.81% to settle at 61,480. This drop is largely due to a recent announcement by the Cotton Corporation of India (CCPC). The CCPC highlighted increased crop production forecasts for the ongoing season. These optimistic production estimates, alongside reduced demand from mills, have been crucial in lowering the ICE (NYSE: ICE) prices for cotton. Furthermore, the story of increased supply continues with Cotton Australia. They, too, have revised their production estimates upwards for the year. However, in the U.S., the situation is a bit different. There, cotton production forecasts were cut according to the latest reports. This reduction has led to trimmed projections for ending stocks.

Global Supply and Demand Dynamics

The global arena presents a mixed bag for cotton supply and demand for 2023/24. Reports indicate increased production, consumption, and trade volumes, yet ending stocks are expected to dwindle. Despite the spectre of lower stocks, the Southern India Mills’ Association (SIMA) has issued a cautionary note against panic buying spurred by the recent uptick in domestic market prices. The market’s underlying strength is underscored by increased mill capacity utilization and a surge in export contracts, signalling robust demand. Nevertheless, apprehensions linger as domestic prices inch closer to international levels, potentially hampering export demand in forthcoming periods.

Market Technicals and Future Outlook

From a technical standpoint, the cotton market has undergone long liquidation, yet interestingly, open interest remains steady. Despite stable market participation, prices have experienced a reduction of 500 rupees. Consequently, the market currently finds its support level at 61,200, with a potential downside risk of 60,910. On the other hand, resistance is pegged at 61,900, and a successful breach of this level could indeed pave the way for testing 62,310. Therefore, this technical analysis offers a glimpse into the possible price movements and critical levels to watch in the near future.

Furthermore, this in-depth examination of the cotton market encapsulates the multifaceted factors influencing price trends, from global supply and demand dynamics to technical market analysis. As stakeholders navigate these turbulent waters, staying abreast of these developments will be crucial in strategizing for the future.

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