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Biren Vakil
Ahmedabad, Sept 20: As the monsoon showers lashed the state, the standing cotton crop got a fresh lease of life. Following the rainfalls, the parallel futures trading is likely to be kicked off shortly. The committee, which is conducting the parallel cotton futures trading at Surendranagar, has convened a crucial meeting today to take a decision about futures trading, it is learnt.
According to traders, prospects for the kharif cotton crop improved following recent rains. The fear of crop damage and inferior quality has been receded. Earlier it was feared that draught like conditions would affect the color of cotton and it may turn out to yellow and that the yield would be lower.
As the prospects improved, the prices subdued from their earlier peaks. At present, crop is seen in better shape. However, production of CO 2, a popular short staple variety grown in and around Surendrangar district and adjoining area would be badly affected as there is virtually no rainfall in these key area. So the CO 2futures traded in Dhrangthra unlikely to resume in the current year too, said a trader.
Traders put the 1999-2000 cotton out put at 36-40 lakh bales against last year's 48 lakh bales of 170 kg each. Area under cotton cultivation same thanks to the delayed boom in the cotton prices. However, scenario would become more clear after October, it is learnt.
So far futures trading is concerned, the Kabala committee which runs the futures at Surendranagar, is scheduled to meet on the next Wednesday to resume parallel futures trading. Insiders claimed that the meeting would be a mere formality. The committee will be allowed futures trading in the next month when the auspicious Navaratri begins.
It is interesting to note that the illegal futures trading, known locally as a Kalyan Kabalo, is one of the most widely traded futures. Traders across the country take positions in the futures. There are three derivative products, the cotton futures, cottonseed futures and bale futures among which cotton futures is themost liquid and popular among speculators. The bales futures is favorite among cash traders and hedgers.
Meanwhile prices were seen range bound as supply and demand seem to be almost matching. Trading remains extremely thin as there is low inventory of old crop. In the forward deals, long staple cotton Sanker prices is quoted around Rs 21,000 per bale for delivery on 1st October. However, no deals are reported yet. The forward quotes are almost matched with spot rate.
Normally new crop quotes should be lower then spot, i e there should be a bacwardation, instead of contango, where forward is higher than spot. Absence of bacwardation indicates underlying firmness, said an analyst.
In the spot markets long staple Sanker prices are quoted around Rs 19,000-21,500 per bale. Short staple Kalyan cotton is quoted around Rs 14,000 per bale. Demand is seen limited, it is learnt.
So far arrivals are concerned, stray arrival of Sanker has been started at leading center like Botad. Arrivals will increase from thenext fortnight if wether remains favorable. Quality is expected to be normal. Crop is seen in good conditions. Pest or insects damage has not been reported yet. For the short staple, cotton Kalyan arrivals will start after Deepavali, said a leading trader.
Meanwhile traders are keenly awaiting resumption of futures trading at Surendranagar. Being a tool of price efficiency, the futures holds key to the price trend, feel speculators.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
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