In 2022, cotton may decline but palm oil will shoot up: Commtrendz Research

Cotton prices may continue to rally in the coming quarters and are likely to cool-off in the second half of 2022, while palm oil prices are expected to hit new highs on robust demand and tight supplies in the new year, Commtrendz Research said.

Addressing a webinar on Commodities Market Outlook 2022, organised by Business Line, commodity analyst T Gnanasekar, Director, Commtrendz Research said cotton, after making decade highs, has been caught in the range at this point in time. On the Intercontinental Exchange (ICE), the benchmark for cotton prices globally, cotton tested $ 1.20 per pound recently and is now consolidating, taking a breather at this point in time.

Citing the CFTC’s recent Commitments of Traders (COT) Report, Gnanasekar said the market is expecting prices to come down in March 2022. Textile mills have taken a view that by March prices will start coming down because of arrivals and various other factors, he said.

In the domestic market, cotton prices made a new high in India at Rs 34,000 per bale (170 kg) recently and corrected to Rs 30,000 levels. “I think they are now headed closer to Rs 34,000-35,000 levels or even beyond that. Eventually in the second half of 2022, prices will come down to below Rs 30,000 somewhere around Rs 28,000 and settle down. Farmers will have more incentive to produce more cotton going forward,” Gnanasekar said.

Presenting his views on the edible oil market, Gnanasekar said through palm oil is not preferred during winters, prices are still somewhere near all-time highs. “It has corrected recently, but fundamentals are extremely intact. High prices are supposed to result in lower demand, but that’s exactly not we have seen in many of the commodities. The conventional demand supply factors are simply not at play at this point in time,” he said.

Kapil Dev, Chief Business Officer, NCDEX, said price volatility has increased across commodities in the recent past as markets have turned more riskier due to the global events such as Covid-19 and Suez Canal blockage among others. The annualised volatility in key commodities has seen an increase in recent years and in case of soyabean it was close to 50 per cent. Such increased volatility creates risks and impacts the inventory management.

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