Cotton farmers hold stock expecting prices to rise

The skies have cleared up, but there are no signs of cotton arrivals picking up, as farmers hold on to their stocks anticipating prices to firm up further, analysts and industry experts said today.

Traders have been blaming the unseasonal rain that recently lashed parts of the country for lower arrivals and crop damages. “Farmers have woken up and they want better returns,” an official with an international trading house said today. “They know there are good chances of prices going up further and that is why they are holding on to their stocks.”

During October 1-December 5, total cotton arrivals across the country stood at 7 million bales (1 bale=170 kg) compared with 7.2 million bales in the year ago period. In Gujarat, the main cotton market, arrivals are down 15 per cent on year to 2.3 million bales. Arrivals are also weak in Maharashtra and only marginally better in Madhya Pradesh and Andhra Pradesh.

The arrivals are low even as Indian farmers are set to reap a bumper cotton output of 32.5 million bales compared with 29.5 million bales harvested last year.

Most farmers have recovered their cash cost as cotton prices have almost doubled this year and are in no hurry to sell their produce, a Rajkot-based dealer said. The dealer said prices are bound to rise as exporters are lapping up the commodity trying to send their shipments before the December 15 deadline.

The government has capped cotton exports at 5.5 million bales for the current crop year and set December 15 as the deadline to ship out export consignments.

Industry believes Indian traders will only be able to ship out 3-3.5 million bales of the contracted exports as domestic prices have risen considerably from last year’s levels, making procurement difficult.

An official with the Cotton Corporation of India said price of Shankar 6, the most popular variety, is at an all time high of Rs 45,500 a candy (1 candy=356 kg). Last year, prices were much lower at Rs 32,200 per candy.