Source: https://in.investing.com

AJAY KEDIA - Commodities Analysis

2022-01-13 

Cotton yesterday settled up by 1.98% at 35480 amid expectations of firm demand, particularly from China and tight supplies. Indian cotton exports have begun to slide due to traders charging hefty premiums over benchmark U.S. futures on expectations of lower output at a time when there is strong demand from local textile mills, industry officials said.

The higher premiums sought by India, the world's biggest cotton producer, could force Asian buyers such as Bangladesh, Vietnam, and China to increase purchases from other suppliers such as the United States, Brazil, Australia, and African nations. 
 
Indian cotton is being offered at around 135 cents per lb, cost, and freight-basis, to buyers in Bangladesh for January and February shipment, nearly 20 cents over U.S. futures. Indian mills have exported 1.8 million bales so far in the season and are likely to ship around 1 million bales in January and February.

India's cotton production could fall to 34 million bales in 2021/22 marketing year, down nearly 4% from a year ago as crops in key producing states were damaged by rains during the harvesting season. The lower output is reflected in spot markets, with daily trading volumes dropping to around 175,000 bales, whereas 250,000 bales would be more usual at this time of year. In spot market, Cotton gained by 100 Rupees to end at 35260 Rupees.
 
Technically market is under short covering as the market has witnessed a drop in open interest by -4.42% to settled at 5629 while prices up 690 rupees, now Cotton is getting support at 35030 and below same could see a test of 34590 levels, and resistance is now likely to be seen at 35720, a move above could see prices testing 35970.

Trading Ideas:
# Cotton trading range for the day is 34590-35970.
# Cotton gained amid expectations of firm demand, particularly from China and tight supplies.
# Indian cotton exports have begun to slide due to traders charging hefty premiums on expectations of lower output
# India's cotton production could fall to 34 million bales in 2021/22 marketing year, down nearly 4% from a year ago
# In spot market, Cotton gained by 100 Rupees to end at 35260 Rupees.

(Source: https://in.investing.com)