India : Cotton prices seek lower level during december latter half

Cotton prices, with the exception of the extra-long staple cotton--DCH-32, in the domestic market remained firm during the first fortnight of December, but started shedding the gains during the later part of the month, according to the East India Cotton Association spokesperson.

The prices ruled high during the first half of December, the average for the month was higher by varying margins compared to November averages.

The price rise between November and December, 2005, averages was four-five per cent in the case of medium and long staple cottons, but it was a steep 17.4 per cent in the case of the extra-long staple cotton DCH-32.

The firm trend during the first half of December was obviously due to the rising demand from both mills and exporters. While mills have been building up raw material inventory due to their increased activity as well as the reasonable levels of prices, exporters turned aactive buyers to capitalise on the price advantage between domestic and international prices and the huge surplyus in the production of medium and long staple cotton.

However, both mills and exporters slowed down their purchases because of the bulging inventory position and the shrinkage in export margins due to rise in domestic market prices and a softening of international prices as well as appreciation of rupee against dollar. This changed scenario and the mounting aarrivals brought down the prices during the latter half of December.

Domestic prices of extra long staple cotton may, however, continue to remain firm as the supply falls short of demand.

Netindia123.com