Cotton procurement by the Cotton Corporation of India (CCI) has crossed 8.5 lakh bales in the ongoing 2018-19 cotton season as prices remained below the minimum support prices (MSP) due to weak global prices and low exports. The Corporation expects procurement to touch 15 lakh bales by the end of the season.
The procurement figure was three times higher from the 3.6 lakh bales procured during the same period last year, said P Alli Rani, chairman and managing director, CCI.
A majority of the stock had been procured from Telangana and Maharashtra where farmers are now coming forward to sell to the CCI instead of approaching traders, she said. Cotton is also being bought from Madhya Pradesh, Karnataka and Odisha. Daily arrivals were 13,000-16,000 bales.
Alli Rani said the increase in procurement to the drop in prices. The prices have been on a decline in the global market. On the Intercontinental Exchange, the price hit a 15-month low last week, while on the Multi Commodity Exchange of India, prices are currently ruling at 10-month lows.
Until now, spot prices were higher than the global price as farmers in Maharashtra and Gujarat, the top two producers, have been holding on to their crop expecting a realisation of Rs 6,000 per quintal because of the expectation of a lower output this year.
The MSP for medium-staple variety of cotton is at Rs 5,150/quintal and that for long staple at Rs 5,450/quintal which are roughly equivalent to Rs 43,000-43,500 per candy (1 candy = 356 kg). The government had raised the MSP for cotton by 26% this year. Around 52% of the crop has already arrived in the market.
In Gujarat, the Shankar-6 variety was sold for Rs 41,500-42,800 per candy (1 candy = 355.62 kg). In Maharashtra, the 29-30 mm variety was sold for Rs 41,500-42,500 per candy. Output in Maharashtra is estimated around 70 lakh bales, lower than 85-90 lakh bales projected during the sowing period. The season had began on a bullish note with prices touching `5,800-5,900/quintal last month.
According to trade sources, contracts worth Rs 5 lakh bales to Pakistan are on hold following the Pulwama attack and have brought down sentiment by Rs 500 per candy. Pradeep Jain, president, Khandesh Ginning and Pressing Association, said farmers who were holding onto stocks until now were in despair to get better prices and had begun bringing their cotton to the market. Prices in Maharashtra were around `41,000 per candy and a lot of uncertainty prevailed, he said.
The Cotton Association of India (CAI) recently lowered its January estimate of the cotton crop by 5 lakh bales than its previous estimate to 330 lakh bales (of 170 kg each) for the 2018-19 season, beginning from October 1, 2018. The main reason for the dip is mainly due to farmers — in the southern zones, including Andhra Pradesh, Karnataka and Telangana — uprooting cotton plants following moisture deficiency, CAI had said.
Earlier, in the December estimate, CAI had projected 335 lakh bales. The CAI has reduced the crop estimates for Telangana by 2.50 lakh bales to 45 lakh bales, Andhra Pradesh by 50,000 bales to 16 lakh bales and Karnataka by 2 lakh bales to 15 lakh bales.