As India is looking at a bumper cotton crop, government agencies are all prepared to enter the market in case prices fall below minimum support levels. Traders, however, said they expect prices to remain above MSPtill December, except in Telangana.
The Cotton Association of India is due to release its crop study report with output estimates in two weeks. The industry expects India's cotton production in 2017-18 to be 375 lakh bales. The International Cotton Advisory Committee (ICAC) has projected global cotton production to rise 10 per cent this fiscal to 25.4 million tonnes.
Private procurement currently on in Telangana is below minimum support price. Traders said prices are low because the crop has more moisture due to the recent rainfall and they expect better quality and increased arrival post Diwali.
"Presently, cotton price of the fair and average quality is ruling above MSP. We are all prepared to enter the mar ket if prices touch MSP or below," said SK Panigrahi, chief general manager, Cotton Corporation of India (CCI).
A section of traders said that even if CCI does MSP procurement operations, it will not be a big one. "If production has increased, consumption is also likely to increase. The number of spindles is increasing in Gujarat due to the incentives extended by the state government," said a person, who did not wish to be identified.
ICAC has projected increase in global as well as India's cotton mill use. Global cotton mill use is expected to increase at 2.7 per cent during 2017-18 to 25.2 million tonnes, up from 1.6 per cent growth last year.
"Mill use in China is projected to grow by 1.5 per cent to 8.1 million tonnes. Cotton mill use is also projected to grow moderately in India, Pakistan, Turkey, Bangladesh, Viet nam and Brazil," ICAC said.
Cotton arrivals started in Gujarat and Maharashtra 20 days ago. In Khandesh area of Maharashtra, where new season's cotton has started arriving, prices of cotton with permissible moisture levels are above MSP.
"We believe that cotton prices in Maharashtra may remain higher than MSP at least till December," said Pradip Jain, president, Khandesh Ginners Association.
Irrespective of market prices, though, yarn manufactures said they want CCI to procure cotton. "We have requested CCI to procure 30-40 lakh bales of cotton to help the industry during the lean period," said J Thulasidharan, president, Indian Cotton Federation.
However, CCI will enter into commercial procurement of cotton only if it does not get enough cotton through its MSP operations.