MUMBAI: Cotton futures have had a strong start to the year and are expected to lift modestly during the calendar year on declining exportable supply, according to a report by Rabobank agri commodity markets research report.
The report said Indian cotton arrivals are tracking lower year-on-year (YOY) on a smaller than expected crop, while speculative net longs has increased in anticipation of further price upside.

Cotton prices are forecast to remain range-bound in the first half of 2013 before shifting higher in the second half of the year as a reduction in exportable supply impacts the market. Futures have edged higher across the curve in January, on improved US export sales, fund rebalancing and a decline in Indian arrivals,'' the report said.
Cotton deliveries in India are trending behind last season, down 6% YOY, limiting the availability of supply and supporting prices.

In India, dry conditions and lower arrivals down 6.4% YOY have increased concerns about the crop. We forecast a 9% YOY reduction in the Indian crop in 2012-13 and may have to adjust our output expectations further if arrivals continue to lag. The price impact of changes to these crop estimates are significant given they represent the second, third and fourth largest exporters,'' the report said.