Cotton slides on heavy arrivals, stock limit fears

Cotton prices have dropped by 8-10 per cent in Telangana from the maximum levels seen 10 days ago. Prices have dropped to ₹7,830 a quintal from the a high of ₹8,710 in a few mandis.

Prices in other parts of the country have also dropped by some three per cent, while on the Multi Commodity Exchange (MCX), cotton futures fell five per cent on Monday.

The fall in prices is mainly attributed to arrivals gathering pace but a Rajkot-based trader in Gujarat blamed the fall on speculators on MCX and European markets.

Ajay Shah, General Secretary, Gujarat Cotton Trade Association, said prices had dropped since the government had taken a serious view of the sharp rise in prices.

Sharp hike worries govt

“We, in our association, have asked buyers not to resort to any panic purchases. The threat of stock limits looms and hence prices are softening. But there won’t be any sharp fall,” he said.

Prices might drop further over the next few weeks on a spurt in arrivals, say traders in Telangana. The Rajkot trader said arrivals are unlikely to witness any huge spurt and prices might drop another ₹500-1,000 quintal. They will still rule higher than the minimum support price of ₹5,726 for this season (October 2020-September 2021).

“No one was selling since prices were high, while buyers too were reluctant earlier,” the trader said. Prices of Shankar-6, the benchmark for exports, have dropped from ₹70,000 a candy (356 kg) to ₹66,500 on Monday.

A cotton trader in Warangal said: “At Warangal, they quoted a price of ₹8,500 on November 1. It fell to ₹8,290 on November 8 and to ₹7,830 on November 15.” Arrivals continue to hover around about 10,000-12,000 a day at Warangal. The situation at Adilabad and Mahboobnagar market yards is no different. “The farmers should get at least over ₹7,000 a quintal to recover their investments,” T Sagar, Secretary of Telangana Rythu Sangham, said.

All-India Kisan Sabha leader S Malla Reddy said there is a good demand for the fibre crop globally. He hoped that the farmers would continue to get a better price this season.

Hostile weather, untimely rains and outbreak of pink bollworm in some areas resulted in poor output this season. Owing to strong demand and poor output, prices are expected to be higher this season.

“The prices might come down a bit further as the market yards are expected to see increased volumes in the next few weeks,” Malla Reddy said.

(With inputs from our Chennai bureau)