Wednesday, April 20, 2011

Steep fall in cotton prices worries farmers, traders-TIMES OF INDIA

Steep fall in cotton prices worries farmers, traders-TIMES OF INDIA

Tags:Kishor Tiwari of Vidarbha Jan Andolan Samiti|cotton prices|farmer suicides /vidarbha

Cotton Crisis


How cotton rates moved

PeriodRate in Rs/Quintal

Fresh arrivals in October

- Rs4,500


- Rs4,000

February end

- Rs7,000

March to April first week

- Rs6500



NAGPUR: For cotton growers, the honeymoon with market seems to have come to an abrupt end, and the textile lobby may heave a sigh of relief. After seeing a high of Rs 7,000 a quintal, last fortnight saw cotton prices in a sudden tailspin, coming down to almost Rs 4500 a quintal. This has raised eyebrows with veterans of the business not ruling out a possibility of prices being rigged.

Normally a distressed lot, cotton cultivators had seen once in a lifetime boom as prices touched record Rs 7,000 a quintal this year. The rates finally settled around Rs 6,400-6500, still substantially higher than the previous years' average. But the last fortnight turned into a nightmare for them. In some market yards, the rates have come down to even Rs 4200 a quintal. There are virtually no buyers for the commodity, say sources.

This is a rather abnormal situation if market dynamics are considered. Normally, price of agriculture commodities goes up as the season ends and there is a considerable time for fresh harvests to arrive. It is because the supply declines with time and rates ease only when the fresh crop arrives. However, cotton prices have seen a sudden crash when fresh arrivals are at least six months away. Experts hint at a strong possibility of the prices being rigged through the commodity exchanges and that eventually having its effect on the physical market.

Analysts say informal reports had emerged from private sources that the area under cotton cultivation is expected to increase in forthcoming sowing season. It is too early to say that and even earlier to judge the final output but it was enough to change the sentiment in the market leading to the prices plummeting. Farm activists say the textile lobby was keen to get cotton prices down. It was also lobbying for the cap of 55 lakh tonnes on exports to be continued so that the bull run could be reigned.

Baddruddin Khan of Angel Broking said that there had been no official word on the estimates but certain trade lobbies came up with the news that the area under cotton is expected to go up by 15% in India and 7% in China. An estimate of sowing can only be made in sowing season that would begin in monsoon and of output once the harvest nears, he added.

The sudden fall has left three categories of persons in a distress. These are farmers, traders in raw cotton and the speculators on the commodity exchanges. "A section of farmers including those in the region had held on to their stocks hoping that the price may go up further and even touch Rs 8,000. However, they will now have to settle at Rs 4500 to Rs 4200. There are reports of rates as low as Rs 3,800 being quoted too," said Kishor Tiwari of Vidarbha Jan Andolan Samiti, a farmers' organisation. Traders too have purchased the commodity for Rs 6,400 to Rs 6,500 a quintal. It takes almost 15 days to deliver it to manufacturers after initial processing. The fall has left them bleeding too, added Tiwari.

A large number of speculators had taken long positions in the commodity exchanges which meant they had bet on a higher rate. They will now lose money, said a commodity analyst at Mumbai.

Sanjay Patil of Hiwrabarsa village in Yavatmal district said he had kept half of his 200 quintals output to be sold later but the crash had led to a loss of almost Rs 2.5 lakh. He had sold the other 100 quintals also for Rs 4200-4400 a quintal and so failed to capitalize on the boom. Those who were not in urgent need of funds had set aside a sizable amount of harvest to be sold later. Their plans had been upset, added Nitin Khadse, a farmer from Jalka village, also in the same district.

"Scared of further losses, traders are desisting from making fresh purchases," said Premkumar Taori, a trader at Dhamangaon. Farmers are feeling that traders have rigged the prices. Rigging could not be ruled out it but there seemed to be a bigger lobby behind it, alleged Taori. Cotton prices had gone up to record levels during this year due to heavy crop losses in China and US.

Tiwari said that the situation was likely to trigger another farm crisis in the region. His organization was advising the farmers that prices would recover in due course. Agencies engaged in counselling the farmers against committing suicide were, surprisingly, no longer seen, he alleged.


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