Cotton candy prices dropped by 0.85% to ₹58,540, tracking weakness in ICE (NYSE:ICE) cotton futures due to sluggish demand and improved crop conditions. Cotton acreage for the current kharif season is down by 9% at 110.49 lakh hectares compared to 121.24 lakh hectares in the same period last year. The Cotton Association of India (CAI) estimates the total area at 113 lakh hectares, a drop from 127 lakh hectares in the previous year, as farmers are shifting to other crops due to low yields and high production costs. This season, India's cotton production and consumption are both estimated at 325 lakh bales. The increased exports, especially to Bangladesh, have tightened the balance sheet, with exports rising from 15 lakh bales to 28 lakh bales.
Imports are projected at 13 lakh bales, resulting in a stock reduction of 15 lakh bales. As per CAI estimates, the spinning mills have a stock of 25 lakh bales, with ginners holding 15 lakh bales and the Cotton Corporation of India having 20 lakh bales. An additional 10 lakh bales are expected in August-September. If the new crop is delayed, the cotton supply could tighten further. Global cotton production is projected to fall, mainly due to lower output in the U.S. and India, with global ending stocks reduced by 5 million bales to 77.6 million.
Technically, the cotton market is under long liquidation, with open interest dropping by 8.72% to settle at 136 contracts. Prices are supported at ₹58,330, with a potential downside of ₹58,130, while resistance is seen at ₹58,720, with a possible move toward ₹58,910.
