Sharp surge in cotton prices has left exporters in a lurch with prices touching ₹42,500 per candy (each of 356 kg). While the Cotton Corporation of India (CCI) has given an upward crop estimate of 351 lakh bales, exporters hold speculators responsible for the artificial rally in the fibre crop.

Export prospects hurt

“The prices have surged by about ₹2,500 per candy within a short span of a week to touch ₹42,500. This happens at a time of peak arrival season and good crop outlook. There is no short supply in the market, but prices continue to head north, which is hurting the export prospects,” said an exporter from Gujarat. Insiders maintained that as many as 200,000 bales (of 170 kg each) were committed for exports. “But at this price, procurement isn’t possible and we can’t make new export commitment,” the exporter stated.

However, some exports have taken place at the rate of 82 cents, which works out to ₹42,000/candy. “But that is very low quantity. The rally is primarily due to speculation of a short supply,” a ginner from Kadi informed.

On the MCX futures, prices of the fibre had touched ₹20,270 per bale, which works out to ₹42,447 per candy on Friday.

Ample supplies

According to ginners, cotton availability is ample and there was no fundamental reason for the short-term rally.

“There were issues during the first two months of demonetisation. Farmers were not bringing the crop because of the lack of liquidity. But the condition has improved now, but arrivals haven’t,” the ginner stated.

Amid surging cotton prices, farmers anticipate higher return for the crop, i.e. raw cotton or kapas . Kapas had touched ₹1,100 per 20 kg or ₹5,500 a quintal. “Many farmers anticipated realisation to further go up, hence held back the crop, causing an artificial rally,” an expert said here.

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