Fears of a fresh Covid wave have led to a rise in daily cotton arrivals to 2.5-3.00 lakh bales, with farmers wanting to sell their stocks on hand before another lockdown happens.
This has resulted in cotton prices testing levels of between Rs 5,300 and 5,850 per quintal, from Rs 6,000 in the last week of November. The drop in prices has led to a fresh surge in buying by the Cotton Corporation of India (CCI), which stands at 40 lakh bales till date, top officials of CCI said. In the latter part of November, the CCI purchased only 28 lakh bales since prices were near the MSP and farmers preferred selling to traders. The picture has changed in the last 10-12 days, with farmers fearing another wave of Covid as a result of which the pace of arrivals has almost doubled, PK Agrawal, CMD of CCI, said.
Last year, till November 30, daily arrivals of kapas were to the tune of 56 lakh bales, and this has gone up by 40% to 92 lakh bales, Atul Ganatra, president, Cotton Association of India, said. By the end of December, nearly 45-50% of the total crop would arrive in the market, causing pressure on prices, he felt.
The Centre has fixed an MSP of Rs 5,850 per quintal for raw cotton (kapas) this season (October 2020-September 2021). Due to CCI procurement, kapas prices almost touched Rs 6,000 per quintal on November 23 before started declining. “The CCI is purchasing at least 50% of arrivals in most markets. In some markets, it is purchasing more. In Telangana and Andhra Pradesh, the CCI purchase is around 70% of total arrivals, while is purchases are around 40% in Maharashtra,” Agrawal said.
The Maharashtra State Cooperative Cotton Growers Federation has so far purchased some 6 lakh bales.
In global markets, cotton prices ruled lower in the first week of December at 71.25 cent for March contracts. The demand from the US and Europe has gone down due to a rise in Covid cases and Indian prices are no longer the cheapest, Ganatra pointed out.
“Exports slowed down after prices increased from Rs 37,000 to Rs 41,500 a candy,” he said, adding that said spinning mills have slowed down purchases as they have 30-60 days of stocks with them. “India sells its cotton at 5-7 % discount to global prices. But since Indian prices are hardly 5-7% higher than global prices, there is no export parity.”. The CAI president said it would be difficult for Indian exporters to ship the targeted 60 lakh bales this season, against 50 lakh bales exported last season.
This will also result in the carryover stocks from this season being higher at nearly 100 lakh bales, compared with the estimated 87.50 lakh bales. Agrawal said the market sentiment is currently driving farmers to bring their produce to the market. Terming this as a temporary phenomenon, he said news regarding speeding up of the vaccine would again lead to prices firming up.
In its first advance estimate of commercial crops for the 2020-21 season (October-September), the agriculture ministry pegged cotton production at 371.18 lakh bales. The CAI has pegged production at 356 lakh bales.