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Government keeping a close watch on cotton prices

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PUNE: As India is looking at a bumper cotton crop, government agencies are keeping an eye on the market to check that prices don’t fall below the government supported price levels. However, trade expects prices to remain above support levels till December, except in Telengana.

Industry body Cotton Association of India (CAI) will come out with its crop study report about two weeks from now. However, the trade expects India’s 2017-18 cotton production to be about 375 lakh bales. The International Cotton Advisory Committee (ICAC) has projected world cotton production to increase by 10 per cent during 2017/18 reaching 25.4 million tons.

The private procurement presently on in Telengana is below the minimum support price. However, traders say that prices are low because crop has more moisture due to recent spell of rainfall and expect better quality and increased arrival post Diwali.

SK Panigrahi, Chief General Manager, CCI said: “Presently, cotton price of the fair and average quality (FAQ) is ruling above MSP. We are all prepared to enter into market if prices touch MSP or below.”

A section of the trade thinks that even if CCI does MSP procurement operations, it will not be a big operation. “Even if the production has increased, the consumption is also likely to increase. The number of spindles is increasing in Gujarat due to the incentives extended by the state government,” said a source, who did not want to be identified.

ICAC has projected increase in global as well as India’s cotton mill use. Global cotton mill use is expected to increase at an improved growth rate of 2.7% during 2017/18 reaching 25.2 million tons. In comparison, during 2016/17 world cotton mill use grew by 1.6%. “Mill use in China is projected to grow by 1.5% to 8.1 million tons. Cotton mill use is also projected to grow moderately in India, Pakistan, Turkey, Bangladesh, Vietnam and Brazil,” said the world cotton body in its latest report.

Cotton arrivals have started in Gujarat and in Maharashtra from past 20 days. In the Khandesh area of Mahararashtra, where new season’s cotton has started arriving in markets, prices of cotton with permissible moisture levels are ruling above MSP. Traders and industry think that cotton prices may remain above MSP till December.

“We believe that cotton prices in Maharashtra may remain higher than MSP at list till December,” said Pradip Jain, president, Khandesh Ginners Association.

Irrespective of the market prices, yarn manufactures want CCI to procure cotton. “We have requested the CCI to procure about 30 lakh bales to 40 lakh bales of cotton to help the industry during lean period,” said JThulasidharan, president, Indian Cotton Federation.

However, the CCI will enter into commercial procurement of cotton only if it does not get enough cotton through its MSP operations. The cotton purchase done by CCI when prices are above MSP level fall in the commercial operations.

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