Monday, 30 May 2011

Cotton farmers Burdened by Early Rains, Govt policy-Times of India


Cotton farmers Burdened by Early Rains, Govt policy

"Together, the farmers and traders have suffered a loss of Rs 20,000 crore thanks to the unfriendly cotton policy of the Union government," said Kishore Tiwari of the Vidarbha Jan Andolan Samiti. "Global prices were at an all-time high, but the government did not allow exports. So farmers are traders were forced to sell at 30% less than the international price," he explained. Tiwari has urged the government to lift all curbs on cotton exports to rescue the farmers.
NAGPUR: The early onset of monsoons has proved to be a dampener for the cotton trade as prices came down further on expectations of a better supply in the forthcoming season. Timely rains may bring good news for farmers who may get to start their activities early and hope to reap sooner. But, on the other hand, traders are left bleeding as the prices crashed when they were sitting on a huge stock purchased at a higher rate as cotton prices had touched a peak this year.

Commodity analysts say that there is a bearish outlook for cotton in the next year which means the farmers may not get a very high rate. The April 2012 contract at National Commodity and Derivative Exchange (NCDEX) is quoted at Rs 792 per 20 kg, which comes to Rs 3960 a quintal. If futures are taken as an indication, the rates may open at lower note at the start of the harvest season in the next year.
Fall of cotton
Year
February
March
April
May
2011
7,000
6,500
5,000-4,500
3,500-3000
2010
2600
3200
3200
3200-3500

(Source: Traders in the region; the table shows how the rates (rupees per quintal) increased with time last year but the trend was reverse in 2011)

Rains striking early on the Kerala coast has led to the likelihood of the sowing season for the Kharif crop starting well or even before time. A better outlook for the cotton crop due to good rains has led to a second round of battering for this commodity's prices. The government's inaction on relaxing the export cap from 55 lakh bales at present also acted as a catalyst.
Currently cotton is being quoted in the range of Rs 3,000 to Rs 3,500 a quintal in the market yards with the situation being worse a fortnight ago when the prices were below the Rs 3,000 mark.
There are estimates of a considerable jump in the supply in the coming season as the area under cotton cultivation is expected to go up by 20% from last year's tally of 11 million hectares. Higher the supply, lesser are the prices.
Cotton prices had touched an all-time high of Rs 7,000 a quintal, in January-February this year which was the peak of the season. Strangely the rates tumbled subsequently, touching Rs 4,500 by April and sliding to a new low of less than Rs 3,000 a fortnight ago. The rates have finally settled at Rs 3,500. It was only an expectation of better crop which triggered the fall in March, but normally it was too early for the markets to react to such an indication.

Traders find it a strange phenomenon. Normally rates of any agricultural commodity are on the higher side as the season ends and ease only when the fresh crop arrives. The fresh cotton crop is still five months away and the rates are already subdued. In May last year, cotton was quoted at around Rs 3500 a quintal, an increase of Rs 600 from the start of the season.
Even as there have been conflicting reports on this input, sources say that some of the farmers too had held on to their stocks hoping to fetch a better rate to only face a crash. Undoubtedly, traders are in a bind as they are sitting on huge stock purchased at a higher rate.
"Together, the farmers and traders have suffered a loss of Rs 20,000 crore thanks to the unfriendly cotton policy of the Union government," said Kishore Tiwari of the Vidarbha Jan Andolan Samiti. "Global prices were at an all-time high, but the government did not allow exports. So farmers are traders were forced to sell at 30% less than the international price," he explained.

Tiwari has urged the government to lift all curbs on cotton exports to rescue the farmers.

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