Domestic cotton markets, which remained under downside pressure since the beginning of the cotton season in October 2012, are now showing signs of recovery, amid firm prices in international markets. Global cotton prices are influenced by three nations; China, India and the US. China is central to any discussion on cotton markets, being the world’s largest producer, consumer and importer of cotton.

India, being the second largest producer, consumer and exporter of cotton, commands a special attention in the world markets. In fact, participants across the globe are eyeing cotton trade policy developments in India as the country supplies a significant portion of its produce to global markets. India has witnessed a sharp rise in yield after the widespread introduction of genetically modified cotton seeds, i.e., BT cotton, in 2002-03, which turned the country’s status from being a net importer to net exporter of the commodity.

In the current context, fundamentals for 2012-’13 season (October-September) seem to be a comparatively stable for domestic cotton markets if exports are maintained around the estimated levels. Considering the recent development of offloading stocks from the state reserves in India and China, cotton prices are expected to trade with a downward bias in the near term.

Prices, which are currently trading around Rs 19,000 ( approx. USD 349)  per bale, may touch Rs 18,500 ( approx. USD 340)  per bale in the near term. However, if international markets continue to trend upwards, cotton prices in domestic markets will remain positive in the medium to long term. Cotton prices may tread towards Rs 19,800( approx. USD 364)   per bale in the next 2-3 months. 

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