CCI offloads half of its cotton stock, to tap Asian markets too

Exploring sale opportunities in other Asian markets to offload the entire quantity procured this year

Government-owned Cotton Corporation of India (CCI) has sold nearly half the fibre procured in crop year 2014-15 under the minimum support price (MSP) operation. CCI has procured a total of 8.6 million bales (a bale is 170 kg) since October 2014 and started offloading in both domestic markets and abroad via daily and weekly tenders. That included export of 80,000-100,000 bales to Bangladesh.

The quantity of sale is significant as domestic textile mills complain CCI has not been releasing enough, resulting in prices moving up. Even so, the price of cotton at Rs 33,000 a candy (356 kg) is at a four-year low.

“We have been releasing enough for domestic mills,” said B K Mishra, chairman and managing director. “We have kept for sale more than 100,000 bales on a daily basis; we estimate daily average demand from mills at 80,000-90,000 bales. In July, we sold around 1.5 mn bales, around 0.5 mn bales more than the quantity sold in June. For the next two months, August and September, we have kept 1.5 to two mn bales for selling to domestic textile mills.”

On a direction from the government, CCI entered into MSP operations after many years of regular purchases on behalf of customers. It procured 8.6 mn bales against its target of nine mn. The problem of liquidation started with slow pick-up from China, one of the world’s largest consumers, due to slowing in the country’s economy.

The Cotton Advisory Board estimates output at 40 mn bales in crop year 2014-15 (October–September) against 39.8 mn the previous season. The US department of agriculture estimates output at 37.5 mn bales in the harvesting season 2015-16, starting this October.

CCI is also exploring sale opportunities in other Asian markets such as Thailand, for which talks are in an advanced stage. “New-season arrivals are just two months away. Before that, CCI would have to offload the entire quantity procured this year. So, we don’t have hesitation in liquidating the entire stock to either domestic or overseas,” said Mishra.