AHMADABAD: Indian cotton farmers, salivating over the prospect of higher prices, are not releasing their entire harvested produce into the market, resulting in a shortage in a global market where the prices are already at record highs.
Arrivals were expected to rise from mid-October, but unseasonal rains over western states of Gujarat and Maharashtra, the top two producers in the country, have delayed harvesting. Jagannath Dharme, a farmer from Akola district in Maharashtra, says he has decided to sell the produce only at the end of the season. “I am aware about increased export demand and the flood situation in Pakistan. Certainly prices will go up after a few months,” he said. India’s cotton marketing year runs from October to September.
The price of the country’s key Shankar-6 cotton variety hit a high of 41,000 rupees per candy (356 kg) last week, up over 77 percent from a year ago on limited supply amid robust demand from local mills and exporters.
The price has risen by nearly 40 percent in the past three months, supported by a rally in New York cotton futures, which struck a record high last week. “Farmers with large land holdings are likely to bring their produce into the market after Diwali. They are expecting prices to rise further,” said Jeevansingh Bayas, a trader based in Jalgaon, Maharashtra.
Diwali, the Hindu festival of lights, is slated in the first week of November and dealers expect an improvement in supplies from mid-November. “Daily average arrivals are around 1,800 quintals this year compared to around 3,500 quintals last year. Farmers won’t sell their produce if moisture content remains higher,” said an official at Rajkot Agriculture Produce Marketing Committee.
Usually cotton with higher moisture content fetches lower prices. At present, the produce that is coming into the market has higher moisture content due to heavy downpours in the cotton producing regoins.
“Despite higher moisture content, farmers are getting better prices than last year. This means that if crop quality improves, they can gain even greater reward. That’s why they are not selling the produce,” said Vikram Chavda, a farmer from Rajkot district in Gujarat.
India, the world’s second biggest producer, has allowed exports of 5.5 million bales in 2010-11. The textile commissioner’s office has already received applications to register the allowed quantity, and until Tuesday afternoon had given permission to export 4.4 million bales.
A leading exporter has estimated cotton output in India in 2010-11 at a record 35 million bales. Higher cotton prices are already hurting the profit margins of local yarn and apparel makers such as Gokaldas Exports Ltd, Alok Industries and Century Textiles & Industries Ltd.
