Cotton industry prepares for MSP purchase in new season, feels market intervention may not be needed

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Pune | Published: September 12, 2019 1:02:01 AM

Amid speculation that private players may stay away from cotton purchase, the Cotton Corporation of India (CCI) has begun preparing for the season ahead.

According to a tweet by Cotton Guru — a cotton advisory service — the crop is at fruiting stage and weather could be the next game changerAccording to a tweet by Cotton Guru — a cotton advisory service — the crop is at fruiting stage and weather could be the next game changer

Amid speculation that private players may stay away from cotton purchase, the Cotton Corporation of India (CCI) has begun preparing for the season ahead.
P Alli Rani, CMD, CCI, said that the agency is geared up for the procurement of 100 lakh bales but believes that market intervention may not be necessary. CCI has all the agreements in place for processing and storing and has all the infrastructure ready if the need arises for the procurement of 100 lakh bales of cotton, which is one-third of the total production, Rani said.

“The highest procurement by CCI so far has been in 2014-15 when the agency had procured around 96 lakh bales. The following years have been no MSP years and last season as well, prices have been 28% higher than MSP. Everyone said that procurement would be required but nothing happened. CCI purchased barely 10 lakh bales during that season,” she pointed out. The Union government had announced the MSP of long staple (27.5-28.5mm) cotton, commonly grown in Punjab, at Rs 5,450 per quintal for 2019-20 (September 1-August 31).

This year as well, there is speculation that despite the fall in production last year, global recession and last season’s balance of stocks, falling prices of surplus and rising imports have led many to fear that cotton prices will be less than MSP.

” If the traders were willing to buy last year I don’t see any problems last year. I don’t see any reason they should stay away this year. Indian consumption of cotton has been steady at around 250-300 lakh bales and imports of around 25 lakh bales this year is not really significant,” she said. “Exports as well have not been very high and the imports have happened because of overseas requirement of value added products,” she added. Cotton accounts for 60% of garments while it is vice-versa in international markets, she said. As per reports, CCI has started preparations to enter the market in Punjab after four years. CCI has parameters for quality of raw cotton to be reasonably good to make procurement at the MSP. Weak international demand and higher support price of cotton in India has made ginners and textile sector reluctant to buy the commodity this season. According to Manish Daga of Cotton Guru, who is currently surveying cotton fields in Beed and Jalna in Maharashtra, there has not been enough sunlight this month. The period of September 15 to October 15 is critical and if the weather remains good, the country could see a crop of 350 lakh bales.

On the other hand, cotton seed prices are high at Rs 3,800 per quintal and therefore money would be compensated through higher seed prices. According to a tweet by Cotton Guru — a cotton advisory service — the crop is at fruiting stage and weather could be the next game changer.

Daga earlier had stated that the MNCs are already bidding for new season cotton at below MSP prices and are getting it. Indian exporters are apprehensive of buying even at this rate and therefore farmers should be prepared for MSP sale. Cotton ginner Pradeep Jain felt that the season ahead would be difficult since price would remain low and traders may not find it viable to make purchases.

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