CCI to begin procuring cotton at MSP from next week

Written by Nanda Kasabe | Pune | Updated: Oct 11 2014, 07:20am hrs
With cotton prices having fallen to the lowest levels in the current cotton year, Cotton Corporation of India ( CCI) has said it will begin procuring the fibre at minimum support price (MSP) next week onwards, beginning from Telengana. "Cotton prices are touching MSP levels at Andhra Pradesh," BK Mishra, MD, CCI, said. "We have received feedback from Telangana and the field staff is already in place at all locations," he explained.

Cotton prices are currently in the region of R33,000-34,000 a candy (356 kg). Market sources attribute the fall to high acreage resulting in record cotton output and zero forwards on export. CCI has opened 300 centres for market intervention and Mishra says CCI is in readiness to begin MSP operations in all these locations. "The fibre coming into the market now is of average quality and has high moisture content of 15-20% more than the accepted quality and therefore prices are low. Arrivals should pick up after Diwali and will peak in December when the moisture content will also reduce considerably," he said.

CCI is in readiness for procuring 50-60-70 lakh bales through MSP operations. In recent years, CCI has not had had to do large-scale procurement to support prices . In 2012 it purchased 22 lakh bales to provide support, mostly in Andhra and Maharashtra. Prior to that, in 2008-09, it procured 90 lakh bales.

The corporation is gearing up to procure the fibre at MSP in Telangana, Karnataka, Maharashtra and Odisha. It will procure cotton in Andhra Pradesh at R4,050 per bale and R3,750 per bale in Punjab.

In all, the corporation expects to procure around 60-70 lakh bales this season. At present, the arrivals are not that much. Arrivals in Andhra Pradesh are around 3,000-4,000 bales per day as against 2-3 lakh bales a day, he said.This year, procurement will be restricted to select states as prices in Punjab, Rajasthan, Haryana and Gujarat are expected to prevail over the support price.

According to J Tulsidharan, president, Indian Cotton Federation (ICF), market sentiment has come down since there has been 12.5% increase in acreage and the cotton crop has been healthy and good. Breaking all previous records, this year the area under cotton cultivation in India has reached a record high of 12.5 million hectares. Last year, the area under cultivation stood at 11.7 million hectares.

Cotton traders and ICF estimate a record harvest of 400 lakh bales (one bale is 170 kg). The carryover stock is around 30-40 lakh bales and international prices of cotton have cropped by 28%.

Prices are currently at R33,000-34,000 per bale and from hereon I expect stability in prices although there could be a drop in prices in November on arrival pressure, Tulsidharan pointed out.

He expects cotton exports to pick up later to Bangladesh and also China to an extent because of the WTO agreement that mandates China to export around 8,70,000 million tonne.

"Australia has been through a drought and therefore some supply that goes to Vietnam could come India's way, he said. "It is unfortunate that though India is the worlds largest cotton producer, it has only a 4.5% market share in the world's textile market while Bangladesh and Vietnam that do not produce a single bale of cotton are way ahead of us. The government needs to focus on a fibre policy," he added.

Moreover, September onwards summer orders for the US and UK are booked and these have to be shipped in March. Since international prices are depressed, it becomes difficult for our country to compete with other markets," he said. Mills are yet to plan bulk buying since they are still carrying huge inventory of the previous years cotton.