Cotton on MCX settled up by 0.29% at 20500 due to dwindling supplies and expectation of lower cotton production in the country. In its first estimate, the Cotton Association of India has pegged the output for the year starting October 2016 at 336 lakh bales of 170 kg each in line with the production in the previous year. As per latest estimate by government, cotton is planted in 102 lh in the country, down by 11% against 114.8 lh last year as on 09 Sep. In Gujarat, the top cotton producing state, the crop had been across 23.8 lh, down 13.8% from a year ago. In Maharashtra, the largest area under cotton, the acreage was at 38.0 lh, slightly down from around 38.2 lh a year ago. According to USDA, cotton production in the country is expected seven year low in 2016-17 at 5.8 mt due to lower area under cultivation and pest attacks in top producer states Weekly export sales data from the U.S. government showed net upland sales totaled 309,200 running bales of cotton for the week ended Aug.25, compared with 275,900 running bales in the prior week. As per ICAC, In 2016/17, world cotton consumption is expected to exceed world cotton production by 1.4 million tons, which would bring ending stocks to 18.1 million tons, down 7% from 2015/16 while world ending stocks are estimated to have fallen by 13% to 19.5 million tons in 2015/16 as global demand outpaced production. Technically market is under fresh buying as market has witnessed gain in open interest by 4.94% to settled at 3672 while prices up 60 rupee, now Cotton is getting support at 20406 and below same could see a test of 20313 level, And resistance is now likely to be seen at 20596, a move above could see prices testing 20693.

Trading Ideas:

Cotton trading range for the day is 20313-20693.

Cotton prices gained due to dwindling supplies and expectation of lower cotton production in the country.

The CAI has pegged the output for the year starting October 2016 at 336 lakh bales of 170 kg each in line with the production in the previous year.

In 2016/17, world cotton consumption is expected to exceed world cotton production by 1.4 million tons, down 7% from 2015/16

Cotton prices in spot market gained by 240 rupees and settled at 21740.00 rupees.