According to feedback from several international cotton merchants and imported cotton companies, although the main ICE cotton futures contract has continued to consolidate in a narrow compartment at 62-64 cents/pound since mid-August, CAI has raised India’s cotton production in 2019/20 by 190 cents. At the same time, the consumption of Indian cotton yarn has been reduced by 3 million tons. The export of Indian cotton yarn to China, Bangladesh and other countries has not improved much. However, recently, not only the spot quotations of S-6 cotton in India have continued to rise, but the CCI auction floor price has also been rising again and again. The upward adjustment of three bucked the trend and “deviated” from the trend of ICE and the international cotton spot market.
According to statistics from relevant departments, India’s CCI has adjusted its bidding unit price upward by a cumulative 1,100 rupees/kandi since the beginning of this year (the latest cotton inventory sales floor price during the period from August 16 to 31 was increased by 100- 200 rupees/kandi), the price difference between Indian cotton FOB and CNF quotations and US cotton, Brazilian cotton, West African cotton, etc. in the same shipping period continues to narrow compared with June/July.
Why did CCI have the courage and confidence to keep raising the bidding floor price despite purchasing a record-breaking amount of approximately 1.938 million tons of cotton? The views of some cotton-related enterprises and institutions are summarized as follows:
First, the hope of clearing CCI cotton stocks this year has basically come to nothing. The Indian government allows multi-year auction sales (mainly due to the raging epidemic, the sharp decline in global textile and apparel consumption, and the Sino-U.S. Affected by many factors such as the signing of the first-stage trade agreement);
Secondly, CCI contracted sales accelerated significantly in July/August, and the “tsundere” sentiment increased somewhat. As the price difference between Indian cotton quotations and US cotton prices in June/July exceeded 10 cents/pound (it once reached 11-12 cents/pound, but is currently only 6-8 cents/pound), yarns from Bangladesh, China, Vietnam and other countries Factory purchases of Indian cotton bottomed out. According to statistics, CCI has sold a total of 518,500 tons of cotton as of mid-August;
Third, CCI has raised the auction floor price, which is conducive to the launch of seed cotton purchases in 2020/21 and protects the interests of farmers. On June 1, 2020, the Indian Cabinet Committee on Economic Affairs (CCEA) approved an increase in the cotton MSP for 2020/21 by 5%. Under the trend of the outbreak of the new crown epidemic, the downgrading of cotton consumption, and the difficult rebound of international cotton prices, 2020/21 This year, CCI will once again purchase a large amount of new cotton at high prices;
Fourthly, rising global food prices and locust plagues and floods in some Indian cotton areas have boosted CCI’s unidirectional price increases. India recently confirmed an outbreak of pink bollworm in Maharashtra, causing huge losses to cotton; and amid the epidemic and extreme weather, the risk of a global food crisis has increased significantly. The United Nations recently issued a warning that a total of 25 countries are at serious risk of hunger this year, and 690 million people around the world are expected to be hungry. The world is on the verge of the most serious food crisis in at least 50 years. </p
