Lower than estimated production combined with the cash crunch and hoarding by farmers has pulled down cotton arrivals at market yards by close to 40 per cent resulting in a short-term rally in prices.

Cotton prices surged in the range of ₹1,011-1,101 per 20 kg (₹5,055-5,505 a quintal) at Kadi market yard in North Gujarat with arrivals of barely 600 bags (of 20 kg each) on Friday, last year around same time, the cotton was quoted at ₹950/20 kg (₹4,755/ quintal).

The note-ban announcement hampered arrivals due to the cash crunch. After about 50 days of the announcement, cotton arrivals on December 28 were recorded at 1,30,538 bags (of 20 kg each), which is about 40 per cent lower than the 2,27,810 bags last year during the same period.

Before the announcement, cotton prices were at ₹900/20 kg (₹4,500/ quintal) as on October 26, and surged to ₹1,000-1,084 (₹5,000-5,420).

“The cash shortage is still hurting the farmers. Some farmers had started accepting cheques, but later they found that banks did not have enough cash to pay against the cheques. So, ultimately even after selling their cotton, the farmers were left without required cash,” said Vitthal Dudhatra, representative of Bhartiya Kisan Sangh (BKS).

India’s cotton crop was estimated at 346 lakh bales (of 170 kg each), with Gujarat’s output at 93 lakh bales. However, due to a pink bollworm attack in the initial sowing period and falling yields from the second picking, the overall cotton crop is feared to drop more than estimated.

Traders expect arrivals to increase once the liquidity situation eases in the market.

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