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Cotton Markets to Remain Firm – Good Earning Opportunity for Farmers

Cotton markets in India have stabilized in recent weeks. As unlocking activity rolls out, demand prospects of Indian cotton is improving – be it local demand or overseas demand. Situation was quite gloomy till second quarter of this year as there was lot of uncertainty of future trade outlook because of pandemic problems and rise in supply estimates.

Abhijeet Banerjee

Cotton markets in India have stabilized in recent weeks. As unlocking activity rolls out, demand prospects of Indian cotton continue improving – be it local demand or overseas demand. The situation was quite gloomy till second quarter of this year as there was lot of uncertainty of future trade outlook because of the pandemic influenced fall in demand expectations and rise in supply estimates. Global cotton prices have appreciated closer to their highest level in nearly 17 months, while the Indian rupee hit a two-month low lately, thus increasing traders' margins from overseas sales. Indian cotton is being offered at around 74 cents per lb, cost and freight-basis, to buyers in China, Bangladesh and Vietnam for November shipment, which is cheaper then 77 cents offered by competitors like Brazil and the United Sates. As per exporters most of the overseas deliveries from India have been to countries of China and Bangladesh in recent weeks.

The Indian Cotton Association (CAI) currently estimates India’s cotton exports to touch 65 lakh bales this year against its June estimate of 40 lakh bales. Last year, India exported 50 lakh bales of cotton as per the Association.  Since India will have a reasonable production surplus this year, the country is set to export larger quantity of cotton versus 2019-2020. In October month, traders had exported 7 lakh bales and contracts for another 1 million bales have signed for November shipment, as per cotton dealers. Exporters also say that India's cotton exports could jump 40% in 2020/21 from a year ago to 7 million bales, the highest in seven years, as depreciation of the rupee and a rally in global prices allow exporters to obtain the export contracts. Cotton Corporation of India, which is holding the largest inventory in the country, has reportedly sold near to 5 million bales of cotton in the past two months.

Global consumption estimates for 2020/21 is presently seen at 24.3 million tonnes as per the ICAC which reflects a rise of around 1.4 MT of rise versus 2019-20 consumption projections of 22.87 MT. According to the ICAC India’s increased production in 2020/21 should be advantageous in offering additional opportunities for exports. China is expected to lead the global cotton consumption at 7.8 MT — equivalent to 30 per cent of total global consumption as per the ICAC. But the estimate is seen supporting Indian cotton industry. The global consumption data show a brightened export prospects for Indian cotton. India’s consumption is estimated near to 5.1 MT this year and this makes China and India together representing approximately 50% of global cotton consumption. 

Procurement of cotton has started in domestic trade centres which keep the market supported. Cotton procurement in Maharashtra may begin from early November. The procurement of seed cotton (Kapas) during Kharif Marketing Season 2020-21 has started from 1st October, 2020 and cumulative procurement as on 9th October, 2020 by Cotton Corporation of India has reached a quantity of 22339 bales under MSP for a value of Rs 6451.73 lakh benefitting 4286 farmers. The Maharashtra State Cooperative Cotton Growers Federation (MSCCGF) had already been directed to plan for procurement from the start of the season in coordination with agriculture produce market committees. The Minimum Support Price (MSP) for Medium Staple Cotton was Rs. 5255/- per quintal and for Long Staple Cotton, it was Rs 5550 per quintal. The MSP for 2020-21 has been raised to Rs. 5515/qtl for Medium Staple Cotton and for Long Staple Cotton the support price are fixed higher at Rs.5825/qtl.  

Prices in near future are likely to remain upward in coming months due to enhanced global/domestic demand for mask and surgical gown production along with increasing in procurement activity. India’s domestic trade prospects are improving also due to the unlocking activity which is expected to enhance demand for cotton products associated with fashion/textile industries. Higher MSP will be an advantage for the farmers since they will be getting better prices versus previous year. Since prices are expected to remain upwards in near future, farmers of cotton are advised to hold for next few months in order to maximize their earning from their produce. 

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