The MCX offers trade in ginned cotton, a processed version of raw cotton, for which the government fixes the MSP. Hence, MSP range stands lower than the ginned cotton traded on the MCX.
“Acreage under cotton across India so far in 2020-21 (July-June) is higher by 24 per cent at 1.7 million hectare (ha) as farmers in the northern states, including Haryana, Punjab and Rajasthan, have brought more areas under the fibre crop. By contrast, cotton acreage in Gujarat is expected to shrink at least by 10 per cent in 2020-21 as farmers may shift to more lucrative crops like groundnut, amid a fall demand outlook due to the coronavirus
(Covid-19) pandemic,” said Vinod TP, analyst, Geojit Financial Services.
According to the ministry of agriculture, cotton sowing across the country till the first week of June touched nearly 16.7 lakh ha against 13.5 lakh ha sown in same period last year.
“Textile mills have gradually restarted operations after the nationwide lockdown and achieved 50-70 per cent of their operating capacity. We believe their capacity would increase steadily. A major quantity of cotton inventory with mills, which was stored before the lockdown, has been consumed. We expect cotton demand to increase by the end of June or early July. Looking at the demand scenario, we have reduced our discount offer, albeit marginally,” said Pradeep Agarwal, chairman and managing director, CCI.
The public sector cotton procurement agency has procured around 10 million bales of cotton worth Rs 25,000 crore this year and set the highest procurement record.
The CCI has lowered its discount price by Rs 200 a candy (one candy = 355 kg) on bulk purchases of cotton bales procured in 2018-19 (Oct-Sep) and 2019-20 marketing years.
“As markets started opening for cotton, Indian exports are expected to pick up as our rates are reportedly the lowest globally. Exports to China, Vietnam and Bangladesh may rise (with additional support from a firm dollar vs rupee),” said Ajitesh Mullick, vice-president (retail research), Religare Broking.