Agri Business

Spinning mills to face heat of higher cotton MSP

Our Bureau Mumbai | Updated on June 05, 2020 Published on June 05, 2020

Higher MSP will benefit farmers to increase the coverage in the forthcoming kharif season starting October   -  THE HINDU

Spinning mills are expected to take a severe hit with the government raising the minimum support price of cotton.

The development comes when spinning mills are facing multiple challenges including fall in demand for fabrics and garments both in domestic and international markets due to the Covid pandemic.

However, higher MSP will benefit farmers to increase the coverage in the forthcoming kharif season starting October.

The MSP for the medium-staple variety was increased by ₹260 a quintal to ₹5,515 per quintal, the price for the long-staple variety revised upwards by ₹275 a quintal to ₹5,825 per quintal, an increase of 5 per cent over this cotton year ending September.

Jayanta Roy, Group Head, ICRA Ratings, said the move is set to benefit farmers who will commence harvesting from October.

The increase in MSP well before the sowing begins and timely onset of monsoon augur well for cotton sowing.

Although cotton sowing in key regions in the Western and Southern belts is yet to start in a meaningful manner, initial sowing patterns in the northern belt indicate higher acreage for the year. Nevertheless, cotton crop remains highly vulnerable to pest attacks and hit output. The locust swarm, which entered India in mid-May and has hit several parts of western and northern India including Rajasthan, also pose a looming threat for the crops as these insects feed on a large variety of crops.

Stock levels to rise

With a double digit decline likely in cotton consumption, closing stock levels are expected to shoot up significantly.

After falling consistently between February and April, cotton prices had gathered some support last month amid increased buying by China to replenish its state cotton reserves.

“Demand-side pressures globally and expectations of higher carryover stocks from the current cotton year are likely to result in a negative bias in the international cotton prices. The higher MSP, however, is expected to act as a price floor, cushioning the decline,” said Roy.

Given that cotton is an internationally-traded commodity, any artificial build-up of domestic cotton prices owing to a higher MSP has the potential of rendering the domestic crop and domestic textile players uncompetitive in the global markets.

Published on June 05, 2020
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