Cotton prices ruling above MSP; government procurement to be delayed

Kapas (cotton) prices are likely to rule above the minimum support prices (MSP) for a better part of the season, which means procurement of cotton from farmers by the Cotton Corporation of India (CCI) will be minimal in the 2021-22 season. Procurement may be required during the peak season when prices drop below the MSP, top officials of the corporation said.

As against 92 lakh bales that was procured in the 2020-21 season, the CCI may not be required to procure more than 30 lakh bales for the new season, Pradeep Kumar Agarwal, CMD of the CCI, told Financial Express. Strong demand for cotton and depleting stocks, in addition to the 10% import duty levied on cotton, have caused prices to rise to Rs 6,500-7,000 per quintal at the start of the season.

Although the area under coverage has gone down by 6-8%, from 133 lakh hectares last year to 125 lakh hectares in the current season, cotton production will still be high because of good rains and may touch 350-360 lakh bales.

As per CCPC data, the 2020-21 season began with an opening stock of 120 lakh bales and the crop size was 371 lakh bales with 11 lakh bales of imports, leading to a total supply of 502 lakh bales. The new season may begin with an opening stock of 60-70 lakh bales.

Cotton arrivals have begun in the north in a small way, with 800-2,000 bales being brought to the market on a daily basis and these are not meeting the quality parameters of the corporation, the CCI chief said. “Significantly, this season along with kapas prices, cotton seed prices are also ruling high and promise good returns to farmers. Seed prices have gone up to Rs 4,500-5,000 per quintal as against Rs 2,500 a year ago,” he said.

Meanwhile, the US Department of Agriculture has forecast India’s cotton production at 29 million bales (480-pound), which is unchanged from last month and up by 2% from last year. Area harvested is forecast at 12.9 million hectares, down marginally from last month and last year due to the slow progress or pause in the southwest monsoon and competition with other crops.

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