The Hindu Business Line : Cotton farmers’ hopes belied as meltdown hits prices

Bhathinda (Punjab), Oct. 26 It happened to sugarcane in 2006. This time, it is happening to soyabean and cotton — a case of growers responding enthusiastically to bullish crop price signals only to find their hopes belied during harvest.

Last year, Mr Gurmail Singh, a farmer with 12 acres at Tungwali village here, had marketed most of his kapas (un-ginned cotton) crop by early November at Rs 2,100 to Rs 2,200 a quintal. “I also sold a small quantity in December at Rs 2,600-plus, but that was more like moo mitha karna (savouring the sweet). For the bulk, I realised only the lower price,” said Mr Singh.

But the signal was clear: prices were headed upwards and the outlook was favourable for growers.

“Till a couple of months back, we were told we would get anywhere from Rs 3,500 to Rs 4,000. We had traders coming here, offering advances to procure at these rates even before the crop had flowered,” he noted.

The primary reason for this — unknown to the majority of growers – was the growing international demand for Indian cotton in the wake of lower supplies from key producers.

Crisis leads to crisis

All this optimism evaporated with the financial meltdown leading to a worldwide exit of speculative funds from commodities. The benchmark Cotlook Far Eastern ‘A’ Index, which averaged 77.09 cents a pound in September, closed this week at 60.25 cents.

The domestic ramifications of this are beginning to be felt, as harvesting of the 2008-09 crop is in full swing with many areas already witnessing two rounds of picking. Farmers in Punjab’s cotton belt are selling their crop at Rs 2,600-2,700 a quintal; better than last year but nowhere near the promised Rs 3,500-4,000 levels.

The current rates are below the minimum support price (MSP) of Rs 2,800 a quintal fixed by the Centre for medium-long staple hybrids.

Last year, the MSP was set way lower at Rs 1,950 a quintal. With market prices higher, the Cotton Corporation of India (CCI) — the nodal agency responsible for price support operations — did not have to intervene. This year, with market rates dipping below the MSP, CCI had to step in, though not to the farmers’ satisfaction.

“From the time I bring my trolley to the market yard, they take a day to conduct the auction and another 2 to 3 days to weigh the produce. All this while I have to hang around,” claimed Mr Hardev Singh, who cultivates on 12 acres at Chappian Wali village in Mansa.

Mr Gurtej Sidhu, who owns 31 acres at nearby Gagrana village, said: “The delay is deliberate because it forces us to sell to private ginners and traders. They pay us Rs 100 less, but at least everything gets done within a day.”

A local CCI official, on condition of anonymity, pleaded helplessness. “What can we do when more than 95 per cent of kapas arrivals are ending up with us? We have our own limitations,” he said.

But according to Mr Sidhu, the real problem lay in CCI’s “totally primitive” arrangements for weighing. “They also have very little ginning and storage capacity near the mandis,” he added.

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