Cotton prices dropped by 0.29% to 62640 as the market was pressured by the likelihood of increased output and decreased consumption in India. The Cotton Association of India (CAI) predicts that the country’s cotton production will rise by 19.3% to 360.2 lakh bales (each weighing 170 kg) for the crop year 2022–2023 from 302 lakh bales the previous year. Favorable weather and more acres are credited with the increase in production.
However, because of the impact of the Covid-19 epidemic on domestic and international textile demand, cotton consumption is predicted to decrease by 6% to 302 lakh bales. The CAI predicted that from 9.8 lakh bales last year to 51 lakh bales at the end of September 2023, cotton closure stocks will increase by 420%. The cotton industry faces significant challenges due to the high inventory level, which lowers prices and decreases farmer and trader profitability.
A slowdown in demand is also affecting the global textile sector; in contrast to expectations of 79%, the capacity utilization rate has remained constant at 74% since the beginning of 2023. However, given that farmers and dealers who anticipate higher prices in the future hold a sizable share of the crop, some analysts think that cotton prices’ potential downside is limited. According to the CAI, there were 234.13 lakh bales of cotton delivered overall through January 31, 2023, which is 20,000 less than during the same time the previous year.
Technically, the market is experiencing new selling as open interest increased by 2.09% to settle at 293 while prices decreased by 180 rupees. Cotton is now receiving support at 62460, and a move below that level could result in a test of 62290 levels. Resistance is now expected to be seen at 62900, and a move above could result in prices testing 63170.