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Weekly Commodity Research Reports

Cotton Weekly from 21st January-24th January 2013

Two outlooks will differ from here. Outlook on Kapas and that on Cotton. Kapas new season crop of V 797, the variety that is traded on NCDEX, will start arriving in February. The basis spot prices will be surveyed and show up on the exchange website. In the spot market V 797 Kapas would ideally trade at a discount to Shankar Kapas. But the V 797 variety crop is very small 5-7 lakh bales against the total production of 350+ lakh bales. The fiber also gets support because of the mixing that is done with the Shankar variety. Shankar Kapas is currently trading at 850 per maund of 20 kg. The above reasons will see Kapas futures come under selling pressure.

Cotton on the other hand should start the process of bottoming. Firm global prices, and weak INR to help exports, supported by steady domestic demand should lend support to the bale cotton. Sources in the spot market also report of demand by the global merchants at lower levels.

Global cotton has come off its seasonal low levels put in place at 70 cents/lbs in the month of November. But prices should face a stiff resistance close to 80 cents/lbs. Charts though point at a next resistance at 82.2 cents / lbs. Fact remains that the current season stock to use ratio is at record levels and that should limit any sharp upsides to cotton in near terms.

Expect Kapas Apr 2013 on NCDEX to trade in the range of 890-950. Jan 2013 Cotton on MCX to trade in the range of 16000 - 16500.

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