Source: CAI

The global glut has resulted in the Cotlook ‘A Index’ price dropping to below 69 cents now.

Written by Gopal B Kateshiya , Vivek Deshpande | Rajkot/nagpur |

Posted: November 6, 2014 9:30 pm | Updated: November 7, 2014 11:32 am (Source: http://indianexpress.com)

For Kanaksinh Jadeja, Arvind Bhoyar and Rubhash Jakhar, cotton symbolised hope and a reason to believe there was still a future in agriculture. All three farmers — from Panchiyavadar in Gondal taluka of Rajkot (Gujarat), Ashi in Warora tehsil of Chandrapur (Maharashtra) and Patrewala in Fazilka (Punjab) respectively — made decent money over the last 10 years by growing cotton. They were helped by two factors.

The first was higher price realisations. Between 2002-03 and 2013-14, average annual prices of kapas (raw, un-ginned cotton) rose from around Rs 2,200 per quintal to well over Rs 5,000 per quintal for the standard J-34 variety. This was enabled to a significant extent by global prices: During this period, the Cotlook ‘A Index’, a representative average of quotes from major markets, increased from under 59 cents a pound to 88 cents a pound.

The second was Bt technology, which led to a near-doubling of average cotton yields. As farmers saw both prices and yields going up, they responded by planting more area under cotton, even as the country’s production almost trebled.

But this year, the story isn’t that good.

Bhoyar has just sold kapas from his first picking at Rs 3,800 a quintal, slightly above the Centre’s minimum support price (MSP) of Rs 3,750 for medium-staple varieties. Last year, he received Rs 4,900. Bhoyar’s disappointment — “The farmer is alive only because he cannot die”, as he puts it — is shared by his fellow farmers from Rajkot and Fazilka. Jadeja has realised a price of Rs 3,905, well below the Rs 4,700 at this time last year.

Jakhar has had to sell long-staple J-45 hybrid kapas — which attracts a higher MSP of Rs 3,950 — for Rs 4,000 per quintal, against Rs 5,300 per quintal last time. Adding to their disappointment is the fact that the remunerative realisations of the last three years — kapas prices crossed the Rs 6,500-level in 2011 — had prompted them to expand the crop area this year. A patchy monsoon and delayed rains only helped, as cotton requires relatively less water while being amenable to late sowing.

Jadeja last year planted cotton in only 35 bighas of his 95-bigha holding, and groundnut in the rest. This time, he grew cotton in 55 bighas (6 bighas make an acre).

India’s total cotton area has gone up from 114.37 lakh hectares (lh) to a record 126.55 lh this year. Maharashtra alone has registered an increase from 38.68 lh to 41.92 lh, and Gujarat from 26.88 lh to 30.06 lh. The acreage switch strategy has, however, not paid off. “We have been squeezed between low prices and high input costs.

Diesel has become cheaper only now, when the season is over, while picking costs have increased from Rs 300 to Rs 500-plus per quintal in the last three years,” complained Jakhar.

The trade blames the lower realisations on bumper crops in India and the US and, more important, China’s decision to restrict its cotton imports at zero duty to 894,000 tonnes a year. Imports beyond the quota will attract 40 per cent duty. The resultant global glut has resulted in the Cotlook ‘A Index’ price dropping to below 69 cents now.

India, in 2013-14, exported 114 lakh bales out of its production of 390 lakh bales. “70 per cent of our exports (annually worth nearly $ 4 billion in the last three years) go to China, which is also the world’s largest importer. Any change in its import policy will naturally affect us, as our cotton prices are now linked to the global market,” said Bharat Wala, a Rajkot-based exporter and president of Saurashtra Ginners Association.

M B Lal, managing director of Shail Exports Pvt Ltd and former chairman of the Cotton Corporation of India (CCI), felt that India’s exports in 2014-15 would fall to 75-80 lakh bales.

“But with domestic consumption growing by 3-5 per cent, kapas prices will probably hover around the MSP, though CCI (the Centre’s market intervention arm) may have to undertake selective buying,” he added.

CCI has already procured about 60,000 bales in Telangana and Andhra Pradesh, where open market prices have fallen below the MSP. “If CCI starts purchasing now, prices may recover to around Rs 4,200-4,250 a quintal. But it usually never intervenes in the beginning of the season,” noted Magan Vadavia, chairman of the Agriculture Produce Marketing Committee at Morbi.

According to Narmada Shankar Sharma, managing director of Gujarat State Cooperative Cotton Federation, this was the right time for government agencies to intervene.

“We shouldn’t wait for prices to go below MSP because farmers would have suffered losses by then,” he said, adding though that his agency has no plans of intervening as of now. Nor has it been asked to do so by the state government.

The Maharashtra government plans to start market intervention operations from December. “But the Centre has directed us to buy only up to 25 quintals per farmer. Accordingly, we have made preparations to buy 100 lakh quintals, which is about one-fourth of the state’s estimated production,” said N P Hirani, chairman of the Maharashtra State Cooperative Cotton Growers’ Marketing Federation.

Farm activist Vijay Jawandhia foresaw a bleak season ahead for growers. “We can’t leave our farmers to the mercy of global price movements.

When the rest of the world cushions its farmers by giving subsidies and imposing trade curbs, why shouldn’t India not do the same?” he asked. (With Harish Damodaran in New Delhi) (Source: http://indianexpress.com)