MCX Cotton Live Price Today

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Cotton is used as fabric since ancient times. The industry got developed during Indus Valley Civilizations, and the method used to fabricate and spun cotton then continued to be in use until the industrialization of India.

Cotton fiber is soft and fluffy. It is found in tropical and sub-tropical regions all around the world, extensively used in the textile industry. It accounts for nearly 35% of the world’s total textile fiber used.

Two historical events- The Industrial revolution in England and The invention of the cotton gin in the United States changed the role of it in the world’s market. These two events worked as a catapult in turning it into the multibillion-dollar industry globally.

What has made cotton so popular?

Besides being soft and fluffy, its strength and capacity to absorb, washed, and dyed have made cotton the most used fiber in the textile industry. Because of its properties, it becomes adaptable to use in the large variety of textile products. It is also an essential raw material in various other industries.

Classification of Cotton

It is classified based on three parameters-

Stability, Grade, and Character.

Staple- Fiber is classified based on its length.

Grade-It ranges from coarse to premium, and it depends upon the color, brightness, and purity of the fiber.

Character- The fiber’s strength and uniformity define its role.

Cotton Plantation

Seeds are sown in the spring season and harvested in the autumn season. It is grown in the warm climate of tropical and sub-tropical regions all around the world.

Top five producers of cotton are:

1. India
2. China
3. The USA
4. Pakistan
5. Brazil

Besides being in the top 5 producers, China is also among the top importers of the fiber.

Bangladesh, Vietnam, Turkey, and Indonesia are the other large importers of this commodity.

Uses of Cotton

The high demand for cotton worldwide is because it is a versatile fiber that can be put to the variety of applications.

The cotton fiber is used in the following ways:

1. As Fabric: It can be woven or knitted into the range of fabrics and can be used to make clothing and other house-ware products of daily use.
2. Cottonseed oil: Edible oil and used worldwide. It is the 5th most consumed oil in the world. Apart from being used in cooking, it is also used as a raw material in many industries. It is used for manufacturing- soaps, beauty products, pharmaceuticals, rubber, and plastics.
3. Livestock feed:  Seed is crushed to make a cotton cake that is used as livestock feed.
4. Linter: Linters are the small fibers that remain in the cottonseed after processing. These linters are used to make- X-Rays, Bandages, swabs, and banknotes.

Factors that influence the price of the cotton

• Demand-Supply Scenario: Demand and supply of any commodity, including cotton, are the major determinants of its price. Its cost of production influences the price of it; inter-crop cost parity, national and international demand-supply scenario.
• Government Policies: The other major influencing factor of cotton price are the government policies on import and export, and minimum support price at which government is willing to buy it if there are no buyers in the market.
• Price of Cotton yarn: The cost of yarn dramatically depends upon the amount of cotton sold across the county. There is a strong positive correlation between the cost of the yarn sold in the country and the price of raw cotton.
• Weather conditions and other factors: Weather plays a vital role in determining the cost of all the agro-commodities, including cotton. Other factors, such as pests and crop diseases, also influence the production of the crops and its prices.
• Prices of substitutes: Prices of cotton are also influenced by the cost of its alternative, such as polyester.
  
  PTA (purified terephthalic acid), a raw material used in the production of polyester, is majorly produced in China.
  
  Cotton traders should carefully watch the market dynamics of PTA to predict the direction of future demand and rate.
• Oil Prices: The machinery and other equipment required to produce cotton require oil to operate; therefore, oil also influence the cost of production in producing cloth and directly affects its price.
  
  Also, PTA is produced from oil and is further used to create polyester. The rise in oil makes polyester expensive and increases the demand for cotton.
• The US Dollar:  It is priced in the dollar in the commodities market. Therefore, the movement in the dollar also significantly impacts the cost of cotton.

Reasons to invest in cotton:

• Strong Global Growth: As the global economies grow, the worldwide demand for cotton also surges.
• Inflation: Investing in an agro commodity like cotton is a good bet to combat inflation. During inflation, central banks increase the supply of the currency notes, and it, in turn, reduces the purchasing power of the fiat currency (viz.US Dollar, Euro, and Pound). In such a scenario, all the natural resources, including agro-commodities, retain their value.
• High Oil Prices: The prices of cotton and oil are highly correlated. As the price of oil rises, it will make polyester expensive and will raise the demand and rate for it.
• Considering all, it can be concluded that investing in cotton is a smart way to mitigate risk and diversify the portfolio.

Risk factors to be considered before investing in cotton

• Offload of stockpiles by China might have the negative impact on the price of cotton.
• Lowering the cost of its substitutes could drive away from the demand for it.
• Subsidies provided by the government to the cotton producers in many countries might result in the overproduction of it, and it can further lead to the decline in the prices of this commodity.

* Contract Launch Calendar Source MCXINDIA https://www.mcxindia.com/home