Home / Knowledge / News / Textiles / Impacts of increased MSP in India on world & US cotton markets
Impacts of increased MSP in India on world & US cotton markets
09
Sep '09
The Cotton Economics Research Institute (CERI) coordinates economic research activities on all aspects of cotton research (e.g. production, marketing, trade, processing, value added) within Texas Tech University and other research units throughout the United States and other countries. CERI releases the report on cotton prices.

Domestic subsidies for cotton and other commodities have been a major topic of interest, especially during the Doha Round of the World Trade Organization trade negotiations. Many developing countries have insisted that domestic subsidies in countries like the United States represent significant trade barriers because they lower world price below their cost of production. India, Brazil, and other developing countries intimate that unless these domestic subsidies are lowered, they are unwilling to provide any more market access concessions in trade negotiations.

However, these countries utilize domestic subsidy programs as well. India, for example, uses a minimum support price (MSP) program, which is similar to the U.S. Commodity Credit Corporation non-recourse loan program. The Government of India (GOI) annually sets the MSP for each growth region, which represents the price at which the government will purchase seed cotton from farmers. The Cotton Corporation of India (CCI) is then responsible for executing the MSP program.

Generally, the MSPs are based on the expected cost of production and are not linked to the market price of cotton (lint). The market price for seed cotton is typically above the MSP, but in September 2008, the GOI announced a significant increase in the MSP of seed cotton, with the increase ranging from 26 – 48% depending on the variety (FAS, 2008). Based on Adams (2009), that level of MSP equates to about $0.72/lb (lint equivalent) for the most commonly produced varieties of cotton. Compared with international prices of $0.55 to $0.58/lb, the MSP is above international prices and therefore may have a direct impact on production and trade flows. In fact, in 2008, the CCI was authorized to purchase as much as 11.7 million bales from the Indian crop in order to maintain the MSP.

The purpose of this paper is to examine the impacts of the increase in the Indian MSP on global and U.S. cotton markets in terms of both price and cotton trade. We utilized a partial equilibrium structural econometric model of the world fiber market developed by the Cotton Economics Research Institute at Texas Tech University (Pan et al.). The structural model first establishes a baseline forecast of the world cotton market along with individual countries and production regions under the status quo of agricultural policy as it exists today and based on macroeconomic assumptions developed by Global Insight. Next, a new projection of world cotton markets was developed under the increased MSP for India with all other policies and macroeconomic assumptions remaining as in the baseline. Specifically,we assumed that the seed cotton MSP is set at 27,500 rupees/metric ton, with a gin turnout rate of 35% to develop projections of lint cotton production and trade.


Must ReadView All

Courtesy: Sympatex Technologies

Textiles | On 23rd Feb 2018

Sympatex, Ricosta jointly move towards sustainability

Sympatex Technologies is moving towards sustainability with its...

Courtesy: Business wire

Information Technology | On 23rd Feb 2018

CLO Virtual Fashion launches CLO 4.0 & new website

CLO Virtual Fashion, a leading developer of cutting-edge 3D garment...

Courtesy: Delta Galil

Apparel/Garments | On 23rd Feb 2018

Delta Galil 2017 sales up 16% to $1,368.1 million

Delta Galil sales for full year 2017 increased 16 per cent to...

Interviews View All

Evelyne Cholet
UCMTF

‘France had a reputation of being big in new ideas, but poor in marketing...

Top executives
Textile & apparel bodies

The mid-term review of FTP is progressive, growth oriented

Yash Agarwal
Hitansh Online

Every market region has its own culture and trends

Riddhi Jain

Conceived in Europe and curated in New Delhi, NeceSera is a...

Tejas N Patel, Navin D Patel

Founded in 1999 by Navin Patel in the name of Tejas Fabrics with 100...

Liz Manning

<div><b>Liz Manning</b>, Business Development Manager at Catexel, has...

Kai Poehler
Voith Paper GmbH & Co. KG

The glass mat industry is growing by five to eight per cent annually. Kai...

Marcel Alberts
Eurofibers

Coating at a fibre level is a practice not usually seen in the...

Kerem Durdag
Biovation II LLC

Kerem Durdag, CEO, Biovation II LLC, provides an insight into future...

Karan Arora
Karan Arora

Bridal couture created with rich Indian heritage, exquisite craftsmanship...

Nisha Chanda
Whistling Woods International School of Fashion

<div>A lack of upgraded courses in costume designing and fashion as per...

Prathyusha Garimella
Prathyusha Garimella

Hyderabad-based designer <b>Prathyusha Garimella</b> is known for blending ...

Press Release

Press Release

Letter to Editor

Letter to Editor

RSS Feed

RSS Feed

Submit your press release on


editorial@fibre2fashion.com

Letter To Editor






(Max. 8000 char.)

Search Companies





SEARCH

February 2018

Subscribe today and get the latest update on Textiles, Fashion, Apparel and so on.

news category


Related Categories:

Planning to Take the Leap towards
Sustainability?

Do you see sustainability as a route to business growth?

Yes No

Do you think the sustainability space has the needed tools and resources available for a business to lead change?

Yes No

Active Poll

Do you see sustainability as a route to business growth?

Yes
70.6%
No
12.7%
Skip
16.7%

Total Votes: 102

Do you think adopting a sustainable approach will be a profitable move for your business?

Yes No

Active Poll

Do you think the sustainability space has the needed tools and resources available for a business to lead change?

Yes
63.7%
No
29.4%
Skip
6.9%

Total Votes: 102

Do you want the world to know about your sustainability journey and your business’ environmental footprint?

Yes No

Active Poll

Do you think adopting a sustainable approach will be a profitable move for your business?

Yes
88.2%
No
8.8%
Skip
2.9%

Total Votes: 102

Thanks for your valuable feedback. Claim your free latest sustainability e-book.

Active Poll

Do you want the world to know about your sustainability journey and your business’ environmental footprint?

Yes
83.3%
No
7.8%
Skip
8.8%

Total Votes: 102


E-News Insight
Subscribe Today and Get the
Latest News Update in Your Mail Box.
Advanced Search