CCI may ramp up raw cotton purchase in north India, may support prices

The Cotton Corporation of India (CCI) is considering a boost in the acquisition of unginned cotton (Kapas) from farmers following strong protests in Punjab. A potential increase in cotton purchases at the government's minimum support price (MSP) could help stabilise prices for both ginned and unginned cotton. CCI had suspended cotton procurement due to the influx of lower-quality Kapas. The government's procurement agency has indicated a willingness to buy, contingent upon meeting specified quality standards. 

It's worth noting that the quality of cotton has been significantly impacted in north India, particularly in Punjab and the Shri Ganganagar region of Rajasthan. According to trade experts, up to 50 per cent of the daily arrivals of unginned cotton in many Punjab mandis fall below the standard quality threshold. Similarly, the proportion of sub-standard cotton may reach up to 70 per cent in many mandis in the Shri Ganganagar region of Rajasthan. This decline in quality can be attributed to the late rains and the prevalence of pink bollworm infestations. The quality issues have been more pronounced in the Shri Ganganagar region of upper Rajasthan, while cotton in the Bikaner region has been less affected. Consequently, cotton prices in the Bikaner region are currently higher compared to those in the Shri Ganganagar region. 

Farmers in Punjab staged a major highway blockade in protest of CCI's suspension of cotton procurement. Local authorities mediated discussions between CCI officials and protesting farmers to facilitate a resolution. As a result, officials have agreed to resume purchasing standard quality cotton, with a strict adherence to quality standards. The government has set MSP at ₹6,620 per quintal for 24.5-25.5 mm and ₹6,920 per quintal for 27.5-28.5 mm unginned cotton. Standard cotton is trading at ₹6,800-6,900 per quintal in open mandis, while sub-standard cotton prices have plummeted to as low as ₹5,000 per quintal. 

Trade sources said that CCI has not initiated cotton procurement in upper Rajasthan due to the supply of poor-quality cotton. If CCI resumes the procurement process, it could provide support to cotton prices. Traders believe that CCI may increase its cotton purchases as prices have dipped below MSP, primarily due to subdued demand in the textile value chain. CCI has already procured 5.95 lakh quintals of unginned cotton in Punjab and accepted 1.12 lakh quintals of relaxed quality cotton below MSP. 

ALCHEMPro News Desk (KUL)