Cotton prices to end year at minimum price level

Despite good offtake from the international market and handsome realisation in the domestic market, cotton prices are expected to end the current year at around the minimum support price (MSP) level.

Of late, the global prices have been firm, and the trend has pushed up the domestic prices of certain varieties.

Last week, reports of quality deterioration affected a few varieties. Among them, Bengal desi and Y1 slumped by Rs 113 to Rs 3,796 a quintal and Rs 85 to Rs 4,302 a tonne, respectively.

In contrast, huge exports deals of about 2 million tonne of Shankar and Bunny fuelled a hike in Shankar's price last week.

While in the case of Bunny, the orders were evened out by its huge arrivals and prices just maintained the previous level, a supply-hit Shankar surged by about Rs 90 across all varieties from the previous week levels of Rs 5,230 (6A), Rs 5,090 (6B) and Rs 4,999 (6C).

"Quality of cotton is improving year after year because of normal and timely rains, and availability of good-quality seeds. Over 100 cotton seed companies are competing with one another for better quality. So, farmers are not only getting good-quality seeds but also these at competitive prices," said K F Jhunjhunwala, president, East India Cotton Association.

Despite strong fundamentals, prices eased because the Maharashtra government has not yet bought any cotton this year (2.8 million bales last year). Secondly, arrivals are in full swing, at around 1,50,000 bales a day, experts said.

However, the prices of extra long staple should rise 30 per cent in line with the price movement in the international market.

As far as the significance of quality is concerned, 5-7 per cent impurities is a common phenomenon every year. So, this should have no bearing on cotton prices, said Ashok Kumar, an Indore-based trader, said.

Quality would have been far better had there been normal rains about 20 days before before harvesting.

However, even with "no rain" exactly 20 days before harvesting will not affect either output or quality very much, he added.

Cotton prices in Indore remained rangebound today with arrivals estimated to be in the 12,000-13,000 bales range. Arrivals are expected to be in full swing throughout January with supplies from all across the country sustaining.

Besides, at present, stock position is also high. Hence, prices are not going to pick up substantially, Kumar felt.

Quality has been on top the agenda for the cotton industry for some time, and as such, it is improving all the time.

The three key reasons for this are: improvement in genetic purity of seed, driving technology mission and good preservation facility.

GOING WHERE THE WIND BLOWS

Reports of quality deterioration have affected the Bengal desi and Y1 varieties

Despite strong fundamentals, prices eased because the Maharashtra government has not yet bought any cotton this year

Global prices have been firm, and the trend has pushed up the domestic prices of certain varieties

Prices of extra long staple should rise 30 per cent in line with the price movement in the international market

Quality of cotton is improving year after year owing to normal and timely rains, and availability of good-quality seeds