Cotton on MCX settled up by 0.34% at 20390 due to weak demand from domestic mills at the spot market. Though, reports of lower production from major growing regions capped some losses in cotton. Cotton Association of India (CAI) has revised its cotton crop estimate downward at 341 lakh bales (each of 170 kg) for the year 2016-17 as against the earlier estimate of 346 lakh bales, projected in October. India's cotton arrivals falls 5% to 12.83 million bales on late commencement of supplies though output for the 2016-17 is expected to higher. Last year arrivals till date stood at 13.51 million bales, according to CCI (Cotton Corporation of India) data. Cotton inflow in north India (Comprising Punjab, Haryana and Rajasthan) grew to 2.67 million bales from 2.18 million bales a year ago. Maharashtra and Madhya Pradesh cotton arrivals recorded marginal rise but in Gujarat fell 13.7% to 27.75 million bales. Cotton arrivals in Telangana slipped 33% to 1.74 million bales. Apart from this, farmers are also holding the stocks expecting prices to rise in the coming months, source added. Cotton Advisory Board (CAB) projected India's 2016-77 cotton output at 35.1 million bales as against 33.8 million bales a year ago. According to CONAB, 2017 began with cotton inventories at only 162,900 tons, the lowest level since 2010-11 and although an increase in the 2016-17 crop is expected, availability of cotton in the market is estimated at 1.6 million tons. Technically market is under fresh buying as market has witnessed gain in open interest by 0.79% to settled at 8205 while prices up 70 rupees, now Cotton is getting support at 20254 and below same could see a test of 20117 level, And resistance is now likely to be seen at 20474, a move above could see prices testing 20557.

Trading Ideas:

Cotton trading range for the day is 20117-20557.

Cotton prices dropped due to weak demand from domestic mills at the spot market.

India's cotton arrivals falls 5% to 12.83 mln bales on late commencement of supplies though output for the 2016-17 is expected to higher.

CAB projected India's 2016-77 cotton output at 35.1 million bales as against 33.8 million bales a year ago.

Cotton prices in spot market dropped by 240.00 rupees and settled at 20120.00 rupees.