Cotton trade body mulls over commodity futures as alternative to overcome price flux

The Indian cotton trade and industry sees various reasons for cotton price flux and is contemplating at commodity future as an alternative to overcome this situation presently faced by them.

J Thulasidharan,president, Indian Cotton Federation addressing a seminar on ‘safety net against cotton price fluctuation said that to secure buyers, sellers and consumers from cotton price instability, the only alternative is to trade through commodity futures exchange, which will provide a platform for risk management to beat the problem faced by the cotton trade and yarn sector in India, particularly on the price front, as one of the major reason is agro climatic conditions and absence of long term cotton policy .

According to T G Senthilvelan, Assistant Vice-President, Multi Commodity Exchange of India Ltd (MCX), Chennai, the major factors influencing prices is the domestic demand supply scenario, inter-crop price parity, cost of production and international price condition.
With trading cotton through MCX, the third largest exchange in the world, it will ensure trade guarantee, risk management, pricing issue and transacton efficiency and liquidity.

While, D Balasundaram, Director, Coimbatore Capital Ltd, was of the view that though cotton trade through exchange needs to increase. Although, India’s cotton trade is Rs 70,000 crore only Rs 200 crore worth cotton was traded through exchange which is due to lack of awareness, is the reason for low trade.

With the awareness, the volume can be increased at least by 10 times, which will benefit the cotton supply chain.