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Indian farmers holding back stock as cotton price falls
Nov '11
In the midst of a fall in cotton prices, cultivators in India are holding back their crop and are waiting to sell at better prices.

Last month, cotton arrivals in the country were 1.48 million bales (1 bale = 170 kg) as against the arrival of 2.1 million bales during October 2010. This is so even as a record production of 35.5 million bales is projected this year compared to 32.5 million bales last year.

The price of the benchmark Shakar-6 variety of cotton has currently decreased to Rs. 37,500 a candy (1 candy = 356 kg) from Rs. 39,600 a candy earlier this month. This is causing the farmers to hold back their stock in anticipation of getting higher price. In February 2011, the price had gone up to Rs. 63,000 a candy.

Speaking to fibre2fashion, Mr. Paresh Valia, Director of Asha Cotton Industries, said, “The farmers are hoarding the stock as they consider the current rates to be very low. They are not ready to sell the stock at lower prices.”

“However, prices are not expected to increase soon. In fact, it seems that the market will see a downward trend. As per my estimate, the price of cotton in December will be close to around Rs. 35,000 a candy. Moreover, the demand for cotton has shifted from India to Pakistan due to lower rates there,” he reasoned.

Explaining the logic behind the expected decrease in the price of cotton, he said, “This year the monsoon is late by about a month. Accordingly, the sowing was also done late by a month. The supply of cotton that is coming right now is actually from the sowing that was done in areas with irrigation facilities in the end of April or in the first week of May. But, the crop that is reaped using rainwater is late by a month due to delay in rains. Hence, the stocks will pick up from the end of November or may be from the beginning of December, leading to a further fall in price.”

Making a cost-benefit analysis for the farmer, Asha Cotton's Director said, “Actually, the cotton that is arriving right now is moisture laden. The farmer cannot hold back this cotton as it will turn yellow if stocked for long. Hence, the farmer has to sell this cotton at the existing market rate. The costing to the farmers is around Rs. 300 per maund (1 maund = 20 kg). So, as it is they are getting three times their cost price. Thus, it is only their greed that is making them hoard their cotton stocks.”

Fibre2fashion News Desk - India

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