Indian Cotton Association Opposes Stockpiling Program
28 October 2016 The Cotton Association of India (CAI) opposes the creation of a buffer cotton stock system for the country.
The Mumbai-based association made its position known against stockpiling 7 to 8 million bales (170 Kgs. each) to sell to user mills during the May to September time frame. According to CAI, this scenario would require a huge investment by the Cotton Corporation of India and, more likely, lead to losses due to price fluctuations.
Citing the China reserve policy as an example, CAI believes that India should learn from China and not venture into the reserve situation for cotton surplus.
According to an industry source active in the cotton trade, stockpiling should not be necessary since the new season is showing good promise and the potential for high production. Rather, textile mills should take advantage of the prevailing low prices and procure cotton and stockpile it themselves. Mills should approach banking sectors for financial options.
In the past two months, prices have come down as much as Rupees 12,000 per candy (356 Kgs.) – or about 20-25%. Other factors, such as no new commitment from Pakistan due to uncertainties there, are also aiding the price decline.
The cotton market source stated that the recent positive estimate by India’s Cotton Advisory Board for the new season should be taken into account. However, should prices decline further, a Minimum Support Price scheme – much like India currently has in place for pulses – should be used to support farmers.
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