Cotton prices up 5-7% over MSP

Cotton prices surged 5-7 per cent in the pre-crop season from the minimum support price (MSP) level it had touched due to surplus stocks last year.

The government fixed the MSP of two basic varieties of cotton "� F-414/H-777/J-34 and H4 of new crop seed cotton (kapas) of fair average quality of cotton season 2005-06 "� at Rs 1,760 per quintal and Rs 1,980 per quintal respectively.

Unlike the scenario in the last few years, cotton prices in the domestic markets are currently moving in tandem with those in the international market because of transparency in business deals.

"The cotton industry in India witnessed a supply surplus of approximately 40 lakh bales (1 bale=170 kg) last cotton year (October 1, 2004-September 30, 2005) meeting all requirements from the organised sector, small-scale industries and home consumption which together account for around 194 lakh bales, against total production of 243 lakh bales from a total of 460 kg per hectare yield, the highest ever since," K F Jhunjhunwala, president, East India Cotton Association, said.

"This year, too, the monsoon is favourable. So, we are expecting production growth of around 17-260 lakh bales with a total per hectare yield growth to around 500 kg," he said.

Total area under cotton cultivation was around 90,000 hectare last year, and it remains the same this year as well.

"We are expecting another 50 lakh bales of cotton surplus this year on a consumption growth of 4-5 per cent, which either needs to be lifted by the government or it should take initiative to promote exports in association with other concerned organisations," Jhunjhunwala said.

Therefore, cotton selling prices may be depressed this year as well, but it would remain higher than last year as prices are getting international support, he said.

Today, Indian cotton is gaining momentum in the international market without the government's promotion, and the industry has already signed contracts for 5-6 lakh bales exports to various countries including the Middle East. However, the industry requires the government support for prices to record healthy gains, Jhunjhunwala stressed.

This is the time when the government sat with the real traders to formulate a strategy to increase exports.

Like earlier years, new produce has already started arriving in Rajasthan in small quantities, but supply can take its full swing only in the last week of November, as there has been delay in crop yielding by 2-3 weeks.