As the cotton prices crashed by 30% in the past two months, the traders in many parts of the country have stopped buying the commodity from the farmers, trade sources said. The prices tumbled drastically following the union government restricting cotton exports.
With pressure mounting on the union government, the official sources said the centre may lift the ban and allow an additional export of 1.5 million bales in the current crop year. The cotton price that ruled at R65,000 per candy (356 kg each) in March has tumbled to R46,000-48,000 due to piling of raw cotton and cotton yarn stocks in the warehouses across the country following the union government restricting cotton exports.
According to VP Lingagoundar, president, Karnataka state cotton association, the cotton procurement from the farmers has been stopped since May 12 in Karnataka. He said the purchase has also been halted in other states like Gujarat, Andhra Pradesh, and Maharashtra. Unless the union government permit exports the cotton procurement from the farmers will not resume.
The government had allowed the export of 5.5 million bales of cotton in 2010-11 and the limit has already achieved by the exporters. The ceiling on cotton exports was imposed in October last year following sharp rise in prices of the commodity hitting the domestic textiles industry. But the situation has changed since the fourth week of March and prices of the natural fibre drastically declined. The price decline was due to piling of fresh stocks and huge carry over stock from the last season, traders said. Around 45 lakh bales of carry over stock has been lying unsold in the warehouses, sources added.
The Cotton Advisory Board projected an output of 320 lakh bales while the domestic consumption was estimated at only 240 lakh bales. With a huge gap between the demand and supply, the farmers expect the centre will allow further exports of cotton immediately to stabilise the falling prices.