Cotton storage crisis looms large

After wheat and rice, a crisis is looming over the storage of cotton, as the government is undertaking massive procurements in many regions to prevent distress sales by farmers after the fiber prices crashed below the state-fixed benchmark rates despite a projected 5% drop in the country’s output.

The government has stacked up stocks of nearly 1.3 million bales in the third-largest producing state of Andhra Pradesh since the marketing year started on October 1, compared with the storage facility of around 1.7 million bales there, sources said. The Cotton Corporation of India (CCI), the government’s biggest procurement arm, had procured a paltry 7,696 bales across the country during the entire 2011-12 marketing year. One bale equals 170 kg.

The situation may worsen as procurement is expected to touch a record five million bales in Andhra Pradesh, out of the state’s projected crop size of 7.2 million bales in the year that started on October 1, sources said. The CCI is procuring 40,000-50,000 bales a day in the state, which means the storage facility will be exhausted in the next few days.

Although prices in top two producers — Gujarat and Maharashtra — are somewhat holding up as of now, a slump in export demand has raised fears of massive procurement operations, and consequent storage crunch, unless cash-starved textile mills’ ability to stock up improves significantly. The CCI board will meet on Monday to review procurement and decide on the next

... contd.