Cotton farmers take advantage on global price trend, sell 80% of this season’s output

Cotton farmers take advantage on global price trend, sell 80% of this season’s output

by admin- Friday, March 19th, 2021 07:49:20 AM

With arrivals dropping, ginning mills may end operations early
Cotton farmers within the country have taken advantage of upper global price for the natural fiber this season (October 2020-September 2021), leading to a minimum of 80 per cent of the assembly being sold till now.

As a result, most of the ginning mills in north and western parts of the country that process kapas (raw cotton) into ginned cotton are likely to shut operations from April this year.
Most of the cotton produced this season have arrived across various markets within the country mainly since prices have ruled above the minimum support price (MSP) of ₹5,515 a quintal since the start of the October.

“Barring 15-20 per cent of kapas that some well-to-do farmers are holding, the remainder of the assembly has arrived. These farmers always twiddling my thumbs and sell only during monsoon since they get an honest price within the off-peak season,” said Rajkot-based Anand Poppat, a trader in raw cotton, yarn and spinning waste.

Higher inflow
According to an estimate by the Cotton Association of India, a body of traders, arrivals till February 28 this year since October 1 were 298.89 lakh bales (of 170 kg).

The arrivals are against CAI’s projection of the cotton crop production at 358.50 lakh bales against 360 lakh bales last season. The Committee on Cotton Production and Consumption (CCPC), a body representing all stakeholders within the textile industry including officialdom , has estimated this season’s crop at 371 lakh bales (358.50 lakh bales last season).

Arrivals are higher despite record carryover stocks from last season. While CAI has pegged the carryover stocks at 115 lakh bales, the CCPC has estimated it at 97.95 lakh bales.

The main reason for prices ruling above MSP this year is because global prices have gained sharply since June last year in sight of consumption being see above production.

For the present marketing year (August 2020-July 2021), the US Department of Agriculture has pegged global production at a four-year low, while consumption are going to be above production for the second consecutive year.

Prices gain
Cotton prices in ny have gained nearly 11 per cent this year, consistent with the Trading Economics website. In fact, prices are off the highs over 90 cents a pound (₹51,700 a candy of 356 kg) seen late last month.

Currently, cotton in ny is quoted at 86.13 cents a pound (₹49,600 a candy), while Indian exporters are offering a benchmark Shankar-6 cotton at ₹45,900-46,200 a candy.

Indian cotton has been offered for exports at a competitive price of between ₹44,000 and ₹48,000 a candy this season. This helped kapas prices to extend in most of the market yards.

Kapas modal prices (rates at which most trades take place) in Gujarat’s Rajkot agricultural produce marketing committee (APMC) yard is ruling at nearly ₹6,100 a quintal. “But quality cotton is getting as high as ₹6,700,” said Poppat.

“This season, arrivals are higher as farmers got good prices,” said K Selvaraju, Secretary-General, Southern India Mills Association (SIMA), the apex body of textile mills within the South.

As a results of the high arrivals till February end, most farmers have run out of their produce or want to carry it back, expecting higher prices afterward during the off-peak season starting May.

According to upcountry market sources, arrivals during March 1-15 were between one and 1.5 lakh bales daily. they need now dropped to 70,000-80,000 bales.

“Arrivals are but one lakh bales lately the opposite problem is that even low-quality cotton fetched higher prices. Since arrivals have dropped to below one lakh bales, we expect a minimum of 50 per cent of the ginning mills to shut operations by the top of this month,” Poppat said.

“The quality of cotton this year isn’t nearly as good as last year. Unseasonal rains have affected it,” Selvaraju said.

Market sources said that a lot of ginning factories are ending operations thanks to the low arrivals.

Poppat said one among the explanations for farmers rushing with their produce to the markets this year was last year’s bitter experience when prices crashed after the novel Coronavirus (Covid-19) pandemic broke out.

“Farmers released cotton slowly and thus ginning mills functioned around the season last time,” he said, adding this season farmers were quick to require advantage of the upper prices to eliminate their stocks.

Stocks, exports
Of the entire arrivals plus the carryover stocks, CAI has estimated consumption during October-January at 137.50 lakh bales, while mills are projected to carry stocks of 92.50 lakh bales.

Cotton Corporation of India (CCI), which bought nearly 100 lakh bales as a part of the Centre’s procurement plans, is reported to possess stocks of 92.50 lakh bales, while ginners, multinational companies and MCX are estimated to possess a complete of 164.89 lakh bales with them.

According to Poppat, a minimum of 44 lakh bales of cotton are exported until last week. Last season, exports totalled 50 lakh bales and this season, they’re projected to increased to 65 lakh bales.

Market sources said exports have slowed thanks to stronger rupee and non-availability of containers, while Poppat said container availability was the main issue. “Bangladesh is that the largest buyer of Indian cotton followed by Vietnam, China and Turkey,” he said.

Market sources said that of the stocks that CCI hold, some 42 lakh bales that were sold haven’t been lifted yet by the buyers. the entire government stock, including by Maharashtra, might be 110 lakh bales, they said.

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