High prices of cotton lead to demand for raw material at reasonable prices

CURRENTLY, THE cotton and soyabean farmers have more than one common cause between them. Growers of both crops are enjoying a rare bull run in prices even as other value chain participants cry foul.
If the poultry industry had complained of exorbitantly high prices of soyabean, it is now the turn of textile industry which has raised its voice against the all-time high prices of kapas (raw unginned seed cotton). The common cause between both the poultry and textile industry curiously is future’s trading platform which they said has resulted in unhealthy speculation and thus price rise in the commodities.
Since the start of the current (October-September) Cotton Marketing Year, average traded price of Kapas in most markets have been well above its government-declared Minimum Support Price (MSP) of Rs 5,726/quintal (medium staple). Talks of a global supply pinch and a short crop in the country had seen further price hike even as farmers decided to hold on to their crop rather than offloading them.
At present, Kapas prices in most markets of Gujarat, Maharashtra and Andhra Pradesh is trading well above Rs 10,000/quintal which the market sources say is a historic high.
India’s cotton production, traders say, can be well around 300 lakh bales (1 bale =170 kg pressed ginned cotton) as against the earlier estimations of 340-345 lakh bales. Price of candy (356 kg of ginned cotton) is around Rs 74,000 which has dimmed prospects of exports.
Indian exports, most say, would be around 30-35 lakh bales as against the normal 60 lakh bales of last season. Domestic demand, traders point out, would ensure not much produce leaves the country. Till date, around 130 lakh bales of cotton has arrived in the market with farmers hoping for higher prices in the days to come.
If farmers are confident of better prices, the textile lobby mainly from the south Indian states have pressed the SOS button on account of high raw material prices.
Textile manufactures in the hub of Tiruppur in Tamil Nadu have decided to go on a two-day strike later this month to protest against the higher than normal yarn and candy prices. A major textile manufacturer based out of New Delhi had even written to the Prime Minister asking for immediate intervention to help them get raw material at reasonable price.
One of the main demands of the textile manufacturers, who procure candy or yarn and weave them into clothes is for ban on trading of the lint on the future’s trading platform of both National Commodity and Derivatives Exchange and the Multi Commodity Exchange. In their letter to the Prime Minister, they have complained of speculative activities mainly on these platforms which has pushed up physical prices. Tamil Nadu Chief Minister MK Stalin has lend his voice with the textile manufacturers and asked for reduction of import duty on cotton to alleviate prices.
The present situation in cotton value chain has uncanny parallel with what had happened with soyabean last year. Alarmed with historic high prices of the oilseed, poultry farms who use de-oiled soyacake (the protein rich solid left after oil is expelled from the seed) as raw material for poultry feed had written to the government to allow for imports and for complete ban on future’s trade of the oilseed.
Lobbying on their part had seen India for the first time allowing the import of genetically modified soya meal. Of the 12 lakh tonnes allowed, around 7 lakh tonnes have already reached Indian shores.
Source: Indian Express