CCI offloads half of its cotton stock under MSP

The Cotton Corporation of India (CCI) which procured 8.6 million bales (1 bale = 170 kgs) of cotton since October 2014, has started offloading the stock in both domestic and international markets through daily and weekly tenders. CCI has sold nearly half of the cotton stock it procured in the crop year 2014-15 under the minimum support price (MSP) operation.

In a rare move, CCI also entered the Bangladesh market after negotiating terms directly with them. It has so far exported between 80,000-100,000 bales. The remaining quantity, it says, was sold to domestic textile mills for local consumption.

CCI restarted MSP operations and procured 8.6 million bales against its self-fixed target of 9 million bales on government’s direction. However, slowdown in China, one of the world’s largest consumers, affected liquidation operations.

Domestic textile mills have been claiming that CCI has not been releasing enough quantity, which is why cotton prices are moving up.

B K Mishra, Chairman and Managing Director of CCI said that they have been releasing enough quantity for domestic mills. CCI has been putting on sale nearly 100,000 bales daily for which they sometimes get good response. But, they get poor response from consumers on various occasions too. So, anyone claiming CCI is not releasing enough quantity into the market is untrue. However, textile mills accuse CCI of cornering nearly 20% of India’s total production to raise prices artificially.

The Cotton Advisory Board (CAB) estimates India’s total cotton output at 40 million bales in the crop year 2014-15 (October–September) as against 39.8 million bales in the previous season.

Looking at normal sowing area this season, the United States Department of Agriculture (USDA) estimates total cotton output at 37.5 million bales in the harvesting season 2015-16, which begins in October 2015.

Total requirement of cotton from domestic textile mills currently stands at 80,000 – 90,000 bales, the CCI said. In July, CCI sold around 1.5 million bales, around 0.5 million bales more than the quantity sold in June. For the next two months – August and September, it said it has kept 1.5-2 million bales for domestic textiles mills.

CCI said that it is also in the process of tapping other Asian markets including Thailand for which talks are in advanced stage.

Mishra further said that the new season cotton arrivals are just two months away. Before that, CCI would have to offload the entire quantity procured this year. So, they don’t have hesitation in liquidating entire cotton stock either to domestic or overseas textile mills, which depends on response to their tenders. They are exploring overseas market too for cotton liquidation.

Cotton price at Rs 33,000 per candy is near a four-year low. So, CCI assumes textile mills will build their inventory at current prices. At an average 80,000 – 90,000 bales of average daily consumption, total cotton demand should go up to over 5 million bales, substantially higher than the stock CCI is currently sitting on.

CCI forecasts, total carry over stock at nearly 2 million bales by the end of current season i.e. September looking at the demand speed from textile mills.