MCX India cuts open position limits on cotton contracts; prices down

Commodity future market Multi Commodity Exchange (MCX) has drastically slashed open position limits on cotton contracts to contain cotton prices and its speculative trading. After the step, cotton prices fell by around ₹4,000-5,000 per candy of 356 kg in spot market. MCX cotton contracts dropped around 2-3 per cent after tightening of the provisions. 

MCX informed its members and traders that revised position limits will be effective from June 9, 2022. Traders’ overall open position limit has been cut from 3.80 lakh bales of 170 kg to 80,000 bales, out of which near month position will not exceed 20,000 bales. Currently near month position is fixed at 95,000 bales. Members’ overall open position limit has been reduced from 38 lakh bales to 8 lakh bales, while the near month position has been cut from 9.50 lakh bales to 2 lakh bales. As per the MCX circular, near month positions should not exceed one-fourth of overall positions. 

Cotton prices dropped by ₹4,000-5,000 per candy in the north Indian market after the step taken by MCX. Cotton traded at around ₹95,000-96,000 per candy of 356 kg. According to the traders, cotton prices have reduced in the last couple of days as demand from spinning mills reduced. MCX June cotton contract was at ₹44,100 per bale after a decline of 2.58 per cent. July contract also reduced by 2.48 per cent to ₹43,650 per bale. 

Industry sources said that it was a long pending demand to contain speculative trading which was fuelling spot cotton prices. Sanjay Jain, former chairman of Confederation of Textile Industries (CITI) told Fibre2Fashion, “It is a good step to control cotton price rise. But there will not be much impact on cotton prices as open interest positions are very low on either side.” 

ALCHEMPro News Desk (KUL)