Cotton prices have improved by R500-700 per bale in the past week leading to weaker procurement by the Cotton Corporation of India (CCI).
Cotton prices are showing an upward trend after several months.
Cotton procurement by CCI dropped down to 5,000 bales a day on Monday. Procurement may vary between 5,000 bales to 10,000 bales a day, CCI officials said.
Total arrivals in the market are around 50,000 bales to one lakh bales a day. So far, CCI has not breached the record procurement of 89 lakh bales six years ago. The procurement by CCI has touched 86 lakh bales this season.
The prices of cotton seeds and cotton have gone up and therefore traders are finding it comfortable to buy cotton directly from farmers, BK Mishra, CMD, CCI, told FE. Cotton seed prices are around R1700-1800 per quintal and traders are purchasing cotton from farmers at a price of around R4,000 per bale. Therefore CCI does not need to intervene, he said.
CCI had procured cotton at support price from October 2014, to protect farmers from sharp decline in domestic prices in view of likely higher output. CCI may purchase another 500,000-700,000 bales in the 2014-15 rabi marketing season. Of this, 260,000 bales have been liquidated by CCI at a price of R32,500 a candy, Mishra said.
The agency has been holding stocks worth around R17,000 crore until now. CCI’s procurement has slowed down in the last few days, as prices have gone up.
Mishra said that if cotton prices go down below the MSP again, the agency will begin procurement again. At present, CCI has stopped procurement from Rakjot and some parts of Gujarat. Most of the purchases this year have been from Andhra Pradesh and Maharashtra, the leading producers after Gujarat.
According to Mishra, the quality of kapas from Gujarat this year has been affected due to the erratic rainfall and in Maharashtra farmers have been getting better MSP than Gujarat. In addition to the weak arrivals, the sale is also not picking up, he said attributing March-end as the reason. After March-end, there has been a long week of holidays as a result of which cotton procurement has not taken off the way it should, he said. Mishra said he does not see the cotton arrivals picking up at the CCI procurement centres and the total purchases may improve marginally.