As cotton prices rule firm, CCI sees little scope for market intervention

As cotton prices continue to rule high, state-run Cotton Corporation of India Ltd (CCI) sees no scope for market intervention in the new season starting October. CCI, which made a record purchase of cotton at the minimum support price (MSP) during the 2020-21 season, expects its carry forward stocks for the next year to be in the range of 2-3 lakh bales.

Ahead of the cotton harvest season starting mid-September, the raw cotton (kapas) prices are currently ruling high at over ₹7,000 per quintal. Also, cottonseed prices are hovering around ₹4,500-5,000 per quintal.

“Everything is in a booming mode, and I think the CCI’s intervention may not be required as farmers are already getting 30 per cent more than the MSP rates. Next year, they may be fully satisfied with the market forces,” P K Agarwal, chairman and managing director, the CCI told Business Line .

“However, as per our duty, CCI would be fully preparing for the MSP operations,” Agarwal said, adding that the intensity will certainly be lower. “In case our intervention is required, may be in the interior or far-flung places, where the competition is not there, we may have to help the farmers in those areas. In case MSP is not there, we may think of commercial operations,” Agarwal said.

Further, Agarwal believes that the current high prices will not sustain for a longer period. “In every commodity, when the peak arrivals are there, the prices are bound to come down. It may come down by ₹500-700 but still be better than MSP,” he added.

Procurement

CCI had purchased 92 lakh bales at MSP during the pandemic hit 2020-21 season, when there were no takers in the market, Agarwal said. “Farmers were protected through the MSP operations as they got an assured price,” he said.

The Centre has fixed an MSP for medium staple cotton at ₹5,716 per quintal for 2021-22 season higher than the previous year’s ₹5515 per quintal. For the long-staple cotton, the MSP for 2021-22 has been fixed at ₹6025 per quintal over ₹5825.

In 2021, CCI disposed of a record 140 lakh bales on good demand from the mills. It also exported about 1 lakh bales during 2020-21. “It was more than a good year. Because of the booming market and price improvement, the MSP losses have also come down substantially to around ₹17,000 crore” Agarwal said.

The 2020-21 season started with around ₹40,000 per bale in October, higher than the corresponding previous year’s ₹36,000. “Now, the cotton prices are ruling between ₹53,000-55,000 range on good demand in the market as the mills have started operations, and their requirement has improved,” Agarwal said. Also, most mills have built up inventory and have covered stocks to meet their requirement for the next 2-3 months.

Inventories

Further, Agarwal said that CCI currently has stocks of around 8 lakh bales. “We wish to keep these stocks till September end to avoid any starvation like situation. We are selling about 1,000-2,000 bales daily and by mid-October we may be finishing our stocks,” he added.

Agarwal expects CCI’s carry forward stocks for the next season to range between 2-3 lakh bales. The overall carry forward stocks for the country is expected to be 60-70 lakh bales.

“The situation is very comfortable because, in the past there had been no occasion when the carry forward stocks were more than 40 lakh bales. This is because of the pandemic situation, India may end up with 60-70 lakh bales, which is almost two-month requirement. The position is not as worse as people are visualising it,” he added. By September end, the new crop will hit the market in North India, he said.

As of August 13, cotton has been planted in about 116.17 lakh hectares in the ongoing kharif season, lower than the previous year’s 125.47 lakh ha, according to Agriculture Ministry estimates.

“The area may be 6-8 per cent less than last year...may be around 123-125 lakh ha as against 133.75 of last year. The productivity seems to be good as the agro climatic conditions for cotton has been good,” Agarwal said, adding that he expects the crop to be between 350-360 lakh bales.

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