Thursday, April 28, 2011

Govt pours cold water on cotton farmers' hopes-TIMES OF INDIA

Govt pours cold water on

cotton farmers' hopes

NAGPUR: Hopes of getting a good price for their produce remained short-lived for cotton growers. Prices plummeted to below Rs 4,500 a quintal during last fortnight after touching a high of Rs 7,000. There were signs of improvement on Monday when the rates firmed up by Rs 500-700 but an announcement by the union minister of commerce Anand Sharma the next day brought them crashing down once more.

Sharma said the government will consider increasing the cap on cotton exports from the current level of 55 lakh bales only in the next harvest season starting in October. This was dampener enough to bring back the cotton prices to Rs 4,500-4200 levels on Wednesday, said a trader at Pandharkawda cotton market in Yavatmal district. The rates further plummeted to Rs 4000 to 3800 on Thursday, when the global slump also added to the fall. Reports of a higher cotton rates world over have pulled down the lint prices to 169 cents a bale, which in turn hit the cotton prices.

The situation has left many farmers including those from Vidarbha in a fix. Many had held on to their stocks hoping for the rates to go up further. Analysts said minister's announcement may bring a further fall.

Prices of lint refined cotton are also down by Rs 1,500 at Rs 52,000 a candy (per 356 kg). The minister's announcement may trigger large scale selling by the dealers, said Manubhai Shah, director of the Cotton Merchants' Association in Gujarat. The move may certainly benefit the textile industry but even this sector is reeling under high yarn prices, added Shah.

However, a section of traders also alleged that textile lobby was manipulating things so that the benefits of global high prices of cotton are not entirely transferred to Indian farmer. Recently Indian farmers got almost Rs 600 less than what they should have got for the best quality going by the international benchmark, said traders. Some times the gap was as much as Rs 2,000 a quintal.

A quick calculation can prove this theory, claims Premkumar Taori, a cotton trader at Dhamangaon. The global price of lint was 185 cents a bale last week. This translates into Rs 60,338 a candy (356 kgs) after deducting transportation expenses, traders' margin and processing charges. Raw cotton generates almost 34% lint and rest is seeds.By this measure, the per quintal rate of cotton comes to around Rs 6200 after deducting other miscellaneous expenses. However, in India lint fetched just Rs 54,000 a candy at that time. So the ultimate rate of raw cotton came to Rs 5600 a quintal, he said. This is because the textile lobby quotes rates of lint according to its convenience, no matter what the global trends are, said Taori. The government control ensures that farmers are not able to sell abroad where they can get higher prices.

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