Ludhiana holds awareness programme on effective cotton price risk management

The awareness programme jointly organised here by Multi Commodity Exchange of India Ltd (MCX), Forward Markets Commission (FMC), and North India Textile Mills' Association focussed on hedging cotton price exposure received a good response.

The experts who participated in the programme held on Friday spoke on the need to manage price risks and volatility associated with cotton prices.

They explained in detail about the MCX cotton contract, which has been well accepted by the cotton value chain players across India millers, ginners, exporters, and spinners, among others.

The interactive session focused on fundamentals of commodity trading, introduction to cotton futures, benefits and importance of hedging.

The participants explained about the technicalities of working of the commodity markets with respect to price discovery, transparency and risk management mechanism in trading and settlement of transactions. Besides, they learned about the role of FMC in regulating and monitoring the functions of commodity exchanges.

"The cotton futures contract offered by the Exchange meets the needs of the whole cotton value chain including farmers, ginners, traders, spinners and textile manufacturers. Further, MCX cotton contract's specification is attuned to the physical market best practices, in terms of staple length, micronaire and tensile strength. This combined with several delivery centres across the country, positions the contract favourably to serve the cotton stakeholders," said MCX Vice President-PKMT Deepak Mehta while making a presentation to the members of NITMA.

"Moreover, the healthy correlation between the international benchmark cotton prices of the Inter-Continental Exchange at USA and MCX cotton prices, also proves the efficiency of MCX to not just discover the local cotton prices but also in providing an efficient hedging platform to the cotton exporters and importers," he added.

Sharad Jaipuria, President, North India Textile Mills' Association said, the volatility as well as high variations in prices of cotton have increased the risks, which need to be addressed to protect profitability margins of the cotton value chain participants.

"We are glad to be associated with MCX in organising this programme as it is necessary to create awareness amongst cotton trade participants on the need to hedge their price exposures effectively," he added.

The programme gave an opportunity to the participants to understand in depth about the cotton futures contract so that they can manage their price risks better.

Having commenced operations on November 10, 2003, Multi Commodity Exchange of India Limited (MCX) is India's first listed, national-level, electronic, commodity futures exchange with permanent recognition from the Government of India.

MCX offers the benefits of fair price discovery and price risk management to the Indian commodity market ecosystem. Various commodities across segments are traded on MCX. These include bullion, energy, metals and agri commodities. The exchange has forged strategic alliances with various Indian and International commodity exchanges and business associations.