'Cotton prices may be higher than the declared MSP'

Q&A: J N Singh

The country is all set to witness a marginal increase in cotton production in the current cotton year. Jagadip Narayan Singh, joint secretary, Ministry of Textiles, speaks to Chandan Kishore Kant on the expected output, productivity and prices of cotton in the next six months. Excerpts :

What would be the cotton output in the current cotton year?

As per the latest figures from the Cotton Advisory Board, the production figures are presently 32.2 million bales. Productivity has increased.

What is the outlook for cotton prices in the next six months?

Cotton prices as per the Cotlook A index are showing a decline of 20 per cent in the last two months. However, the fact to be considered is that the global demand continues to be higher than the supply by about 2 million tonnes. So the underlying trend will definitely be bullish.

I expect the prices to be slightly higher in India than the declared minimum support price(MSP). At the same time, the extent of dip in global demand in this particular year remains an uncertain factor.

Reports suggest that with inadequate power supply resulting in shutdown of mills, consumption of cotton will not be high. What do you think the consumption pattern will be this year?

It is true to a certain extent. There was a decline of about 5 per cent in the cotton yarn production in August 2008 compared to the corresponding month last year. At present, as the cotton season has just started, it is difficult to say whether the power situation will continue to be bad for the whole year, but if that remains, then we may have a slight dip in cotton consumption domestically.

Will the momentum of cotton exports witnessed in the cotton year 2007-08 be repeated this year?

The export may continue this year, more or less in the same pattern. Since the domestic demand is not expected to grow, it is logical to export our surplus, whether the domestic prices rule above MSP or below it. The global demand situation especially in China continues to be a difficult factor to assess. That will depend on the consumer behaviour in the US and Europe.

What will be the impact of rise in cotton MSP on the textile industry?

The government has assured supply to the industry at the market rate but the industry should also not miss the chance of buying cotton at the best possible prices, as at some point in the cotton season, the prices are definitely going to go above the MSP.

Production of short and extra-long staple cotton is on the decline compared to the long staple cotton…

Market forces are not kind to these varieties as the farmers are not getting remunerative price compared to the S-6 long staple variety.