Cotton trade body Cotton Association of India (CAI) has raised serious objection over the US Department of Agriculture’s (USDA) assessment of India’s cotton stock positions alleging a misleading portrayal of India’s cotton market in the international market.
In its India-specific Cotton and Product update for June 2020, the USDA has estimated a cotton carryover stock of 19.8 million US bales (each of 480-lb) as on July 2020. This works out to an equivalent to about 244 lakh bales (of 170 kgs each). The CAI termed it ‘astronomically high’ figure from the reality.
“The carryover stock estimated by USDA is astronomically high which is creating a perception in the international market that there is a glut in Indian cotton. Due to this, buyers get confused and reluctant to buy,” said Atul Ganatra, President, CAI.
In a letter to USDA, Ganatra informed that both the Cotton Corporation of India (CCI) and CAI have estimated the carryover stock of Indian cotton at 50 lakh bales as on September 30, 2020 as against the stock estimates of 200 lakh bales by the USDA. The Cotton Advisory Board (CAB) has also estimated the carryover stock as on September 30, 2020 at 48.41 lakh bales. He requested the USDA for reconciliation of the carryover stock data of USDA with CAI.
The said misleading USDA cotton stock figures are said to have depressed the Indian cotton prices leading to a loss for the farmers.
Seeking govt intervention
The CAI has also written a letter to the Union Textile Ministry seeking an intervention in the matter and conduct an exercise of reconciling the carry-over stock with USDA to restrict the damage.
In the letter dated July 8, Ganatra stated that the USDA’s figures are “..totally misplaced and artificially depressing the prices of Indian cotton in the international markets. Indian cotton, which, on an average, used to trade at a premium of about 200 points on ICE, is currently trading at a discount of over 600 points on ICE.”
“We apprehend that this false propaganda of showing excessively high carry‐over stock of Indian cotton seems to have been undertaken with the ulterior motive of depressing and derailing the prices of Indian cotton. This apprehension, if true, will cause a huge damage to the entire cotton and textile value chain of India,” Ganatra alleged.
Ganatra added that the depressed prices of Indian cotton are causing huge losses to all stake holders of the Indian cotton value chain. Farmers are holding about 10 lakh bales of raw cotton (kapas), Ginning & Pressing factories and the government agencies are holding the stock of over 102 lakh bales procured under MSP operations.
He stated that the cotton prices last year were quoted at ₹45,000 per candy of ginned cotton (each of 356 kg) while the imported cotton quoted at around ₹42,000.
Loss to textile mills
“However, this year, the situation is different. Indian cotton prices are quoting at below ₹35,000 per candy - which is a discounted rate by more than ₹7,000 as against the imported cotton prices. So, compared to last year, Indian cotton prices are now cheaper by over ₹10,000,” said Ganatra, adding that as against a premium on ICE, Indian cotton are currently trading at heavy discount.
The depressed cotton prices are also adversely impacting yarn prices and causing losses to the Indian textile mills and garment manufacturers who are also suffering losses in export market.