The changed trading norms at the EICA have been successful in luring traders not just from the local and upcountry markets like Ahmedabad, Surendranagar, Punjab and Haryana among others but even from the non-resident Indians in some of the Middle East countries like Dubai and Muskat.

Cotton futures were kicked off on December 5, 1998 at the EICA after a gap of almost 30 years. However, given the long span of absence of trading in cotton futures, there were apprehensions among cross-section of cotton traders and corporates as to the success of trading in cotton futures. Trading in cotton futures was therefore, not picking up despite various efforts by the EICA.

The increased level of interests among thecotton traders comes at a time when the size of unsold cotton crop has reached its peak and the situation could aggravate further from next month when the mandis will witness fresh arrivals of record cotton crop this year.

Further, the area under cotton cultivation during the current season too peaked to an all-time high. According to Directorate of Cotton Development, the estimated area for cotton during 1998-99 has jumped to 93 lakh hacters, up from 91.22 lakh hactares in 1996-97. During the 1980s and the first half of 1990s the area under cotton cultivation hovered around 80 lakh hactares, the highest being 80.57 lakh hactares in 1981-82.

The actual numbers of Indian Cotton Contract (ICC) traded during the last week were not made available, but according to EICA president Suresh Kotak "the activity has picked up considerably during the last one week. We are happy about this development and will continue to seek suggestions from the cotton futures user community for its wider acceptance."

Tillrecently, hardly three to four contracts of ICC were transacted daily. Of late, these have jumped to over 200. This figure, however, could be too optimistic, some traders say.

According to Kotak, traders from the upcountry market like Surendranagar, Haryana, Punjab among others have of late been testing the effectiveness of official trading in cotton futures at EICA. "Many of these traders have been tired of the Kabala, unofficial, trades in cotton at the various centres and therefore, prefer official trading in cotton." It may be recalled that in April this year, EICA got clearance from the Forward Markets Commission (FMC) for its proposed changes in trading norms which were made more user-friendly. Included in these changes was the permission, for the first time, to members to appoint market-makers; curbing the long list of various categories of members EICA had initially opted for. EICA had also permitted the traders to trade on their own account in addition to that of their clients while halving thetransaction cost was cut to around Rs 25 per unit and even increasing the limits for institutional members' open position to 3,000 units from 600 earlier.

"We are constantly vigilant on the effectiveness of the cotton futures through our weekly meeting of the hedge committee, and are even working on some new user-friendly products" Kotak said. The details were not provided, though, as the new products were on the drawing board.

Depending upon the members' capital adequacy and previous record in meeting his commitments, EICA even provides additional trading facilities to its members. "But these are all within the norms cleared by the FMC," Kotak said.

Maharashtra announces auction for cotton

Burdened with ever-rising stock of unsold stock of cotton, the Maharashtra State Cooperative Cotton Growers'Marketing Federation (MSCCGMF) is once again forced to resort to auction sale.

The Federation is said to be burdened with an all-time high stock of around 13 lakh bales, of which it hopes to disposeoff some 20,000 bales of cotton of all varieties and grades of 1997-98 and 1998-99 season by open auction on "as is where is basis".

The auction was held in Mumbai on Saturday August 7 at the Federation's office at Khetan Bhavanm, Mumbai. The samples were put on display at the EICA exchange premises in Sewree from August 5. The delivery of the auction is expected to begin from August 12.

MSCCGMF is the only state-supported institution in the country which supports the cotton growers in the state with its unique monopoly cotton purchase scheme. Under the scheme, the Federation sometimes is forced to buy cotton even at higher than market rates.

In the latest auction, the participants were expected to deposit a sum of Rs 2 lakh before the commencement of the auction. All buyers were expected to pay Rs 500 per bale, for private mills/traders and Rs 300 per bale for cooperative mills (in Maharashtra)/ National Trading Corporation (NTC) or MSTC for bales purchased by them by August 2.