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Cotton price expected above MSP & bullish post-Covid demand sentiments

Cotton Price above MSP in 2021

In the year 2021-22, a strong rebound in post-Covid-19 demand and bullish sentiments due to tight supplies are expected to keep Indian cotton prices well above the minimum support price (MSP) levels set by the central government (October-September).

High cotton prices will reduce the central government’s cotton procurement budget to a pittance from the ₹ 55,000 crore spent collectively on cotton procurement during the previous two cotton seasons, said the trade and industry experts and veterans at a webinar hosted by the apex trade body for cotton ‘Cotton Association of India’ (CAI).

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‘During the 2019-20 and 2020-21 seasons, CCI spent a total of ₹ 55,000 crore and purchased two cores and seven lakh bales. Because cotton prices are currently 30% to 40% higher than the MSP, our intervention may not be necessary for 2021-22,’ Pradeep Agarwal, chairman of Cotton Corporation of India (CCI), a public sector undertaking of the Ministry of Textiles, said.

According to Mr. Agarwal, cotton harvest is anticipated to be 355-360 lakh bales in the year 2021-22, almost the same as last year’s harvest of 355 lakh bales, despite a reduction in cotton sown area from 133 lakh hectares in the previous year to 125 lakh hectares in 2021-22.

Cotton’s global outlook has been bullish due to lower ending stock in the US, which has kept cotton prices on the International Cotton Exchange (ICE) strong. According to Sumeet Mittal, general manager (cotton) at Louis Dreyfus Company. ‘The outlook for major producing countries’ output is bleak. Cotton commodities will have a better run than other soft commodities in 2021-22.’

Domestic demand from textile industries is strong due to good margins and rigorous export demand. ‘Despite rising cotton prices, mills are expected to buy actively as demand and usage are expected to be stronger than supply,’ said Dhiraj Khetan, managing director of Sri Salasar Balaji Agrotech.

According to Arun Sekhsaria, director of DD Cotton, ‘When daily arrival figures reach 2 lakh bales per day in November/December, some areas of the country may require CCI intervention.’

However, due to high demand, the trade expects farmers to hold onto the crop at case prices fall. Deen Dayal Purushottam Lal partner Mahesh Sharda stated, ‘The market is robustly supported. Farmers will reduce their output if prices fall below ₹ 7000 per quintal.’

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The mills would like to go a little longer because they made a good profit, and the demand for cotton from MNCs indicates good international buying as well. I believe the CCI will be unable to conduct operations this year, with the exception of Telangana.