Cotton Corporation's target of 10 million bales cotton half way through

Already 4.82 million bales procured to support prices from falling

The Cotton Corporation of India (CCI) is set to buy a record amount from the open market this season. About half the CCI’s target of 10 million tonnes (mt) for this cotton season (October 2014-September 2015) has been met. So far, it has purchased 4.82 million bales (170 kg each) from areas where prices have fallen below the minimum support price.

This season, India is estimated to produce 40 million bales.

At a time when demand is substantially low, steady arrivals in states such as Gujarat are forcing CCI to procure more and hold stocks. Yarn spinners, too, aren’t buying cotton and the yarn export window has shrunk considerably.

It is assumed a glut in the market is behind CCI’s reluc-tance to release cotton in the open market.

 

Speaking to Business Standard, B K Mishra, chairman and managing director of Cotton Corporation, said, “CCI has not taken any stand on the liquidation of cotton.” He added 4.8 million bales had been procured and arrivals were in full swing in Maharashtra, Gujarat and Andhra Pradesh.

Daily arrivals stand at 250,000-300,000 bales.

Through a credit line guaranteed by the central government, the corporation has arranged warehouse facilities. “We plan to procure about 10 million bales; we can store this much comfortably. Considering the volume of procurement in the past few years, if we achieve the target, this will be the highest procurement. So far, the highest procurement was in 2008­09, when it stood at 8.9 million bales,” Mishra added.

So far, CCI has spent Rs 9,600 crore on procurement, at an average cost of Rs 1,060 a quintal. It is wary of releasing the stock, as the prices are unlikely to be viable. It is likely CCI will consult the Union agriculture ministry before taking a decision on off­loading to millers.

An exporter said though prices in the global market were slightly higher, after accounting for freight, the margins were low.

While traders think liquidation by CCI at a certain price will create a benchmark in the market and help raise the prices, officials fear this might trigger a fall, as supplies will increase.

Mishra said there should be an agriculture produce market committee (APMC) every 25 km and CCI should operate thro-ugh these. If there weren’t enough APMCs, states should stream-line the process and help farmers, he added.

Monthly domestic cotton consumption stands at 2.2-2.4 million bales.

Hardyal Singh Cheema, senior vice-president, North India Textile Millers Association, said, “Domestic mills are in no hurry to stock cotton. They have some inventory.”

When CCI commenced sales, smaller mills would be given a grace period to lift cotton, said a CCI official.