Cotton on MCX settled up 1.43% at 21300 on strong demand despite of higher supply in domestic market. Prices of cotton were up as USDA raised its monthly consumption forecast for cotton in India from 29.81 million bales to 30.45 million bales estimated domestic inventory at 14.86 million bales of 170 kg each down by 4.1% from the Jan month forecast. However, sharp gain in the prices was capped by higher output after Cotton Association of India (CAI) pegged cotton production for year 2016-17 rose by 1% to 34.1 million bales compared to 33.8 million bales produced last year while total domestic consumption was forecasted at 29.5 million bales. Government pegged total cotton production for year 2016-17 at 32.5 million bales in its second advance estimates, said CAI in a statement. The Cotton Association of India (CAI), the apex trade body for the sector, has maintained the crop estimate for 2016-17 season at 341 lakh bales of 170 kg each in its latest estimates for January, same as that in the previous month. However, it expects the consumption of the fibre to increase marginally in the year ahead on pick-up in demand. CAI expects cotton consumption to increase for the ongoing crop year to 295 lakh bales, against its previous estimate of 290 lakh bales. Technically market is under short covering as market has witnessed drop in open interest by -8.4% to settled at 1942 while prices up 300 rupees, now Cotton is getting support at 21173.4 and below same could see a test of 21046.7 level, And resistance is now likely to be seen at 21403.4, a move above could see prices testing 21506.7.

Trading Ideas:

# Cotton trading range for the day is 21047-21507.

# Cotton prices ended with gains on strong demand despite of higher supply in domestic market.

# Government pegged total cotton production for year 2016-17 at 32.5 million bales in its second advance estimates, said CAI in a statement.

# CAI expects cotton consumption to increase for the ongoing crop year to 295 lakh bales, against its previous estimate of 290 lakh bales.

# Cotton prices in spot market gained by 120.00 rupees and settled at 20570.00 rupees.