Cotton Declined After CCPC Increased Crop Production For The Current Season

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March 20, 2024 Cotton candy prices closed lower by -1.04% at 60,880, driven by various factors impacting supply and demand dynamics in the cotton market. The Cotton Corporation of India (CCI) raised its crop production estimate for the current season, indicating higher expected supply levels. This increase in production, combined with lower demand from mills, contributed to downward pressure on prices. Additionally, Cotton Australia raised its production estimate for the year due to favourable weather conditions, further adding to the supply outlook. In the United States, cotton production forecasts for the current season were revised lower based on recent data, with reduced ending stocks projected.

However, the global cotton supply and demand estimates for the year showed higher production, consumption, and trade, albeit with lower ending stocks. Increased production in India offset declines in the United States and Argentina, while higher consumption in China and India boosted global demand. Amidst these developments, the Southern India Mills' Association (SIMA) cautioned textile mills against panic buying of cotton due to recent price hikes. Capacity utilization at mills has increased, with a significant portion of cotton already contracted for exports. However, SIMA highlighted the potential dampening effect on export demand as domestic cotton prices approach international levels.

Technically, the cotton candy market witnessed long liquidation, with a notable drop in open interest by -9.4% to settle at 241 contracts, alongside a significant price decrease of -640 rupees. Key support levels for cotton candy are identified at 60,660, with potential downside testing towards 60,450 levels. On the upside, resistance is expected at 61,140, with a breakout possibly leading to further gains towards 61,410.

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