Commodities

An all time high closing stock may affect market sentiment

With closing stock for the current season likely to be standing around 70 lakh bales, the new season expected to open in a bearish mood. Arbind Gupta reports.

Northern states have witnessed a satisfactory sowing even as there has been around 10 per cent increase in area. After GEAC’s permission, legal sowing of Bt cotton was carried out in the region for the first time. According to experts, approval of Bt cotton’s commercial production enthused farmers to take up more area under cotton. “Sowing has been quite satisfactory in the north zone. In fact, area has gone up by around 10 per cent. With production of Bt cotton now being started, the productivity will improve in future,” said Mr K F Jhunjhunwala, president, East India Cotton Association (EICA).

In the central zone, sowing has picked up in Gujarat and Maharashtra with the progress of the south-west monsoon. “Everything has moved satisfactorily so far. We will have to wait for some more time and see as to how the entire process of sowing shapes up in coming weeks,” stated a trader.

Meanwhile, the national arrival has crossed 236 lakh bales mark. “The kind of arrivals (2,000-3,000 bales per day) that are taking place at present, we certainly end up this season at around 240 lakh bales with some portion also adding from the new season,” opine trade sources.

Commenting upon the prospects of new season, Mr M B Lal, managing director, Shail Exports said, “I am very much optimistic about the forthcoming season. The domestic production may touch an all time high of around 270 lakh bales. Area under Bt cotton is on the rise. Supply of quality seed has improved and most importantly awareness at the farm level has gone up considerably, leading to improvement in the extension system. All this will no doubt add to the productivity to a great extent. Towards this end, the recent efforts of ICMF-CDRA should be applauded.”

Despite all optimism, trade sources have expressed their apprehension about the huge stock of around over 40 lakh bales being held combinely by the Maharashtra federation (around 29 lakh bales) and the Cotton Corporation of India (10 lakh bales). Both the agencies are facing stiff resistance in the market which has turned buyers’ on account of demand-supply mismatch. In the ongoing season, the state federation procured 44 lakh bales, and so far has been able to sell just around 13 lakh bales (entire domestic sales). Similarly, CCI bought around 28 lakh bales under its MSP operation and could able to sell around 16 lakh bales in the domestic market and around 2.96 lakh bales in the export markets.

“The huge stock with both these agencies is affecting the sentiment not only in the current market scenario but also expected to take its toll on the coming season. The closing stock for the current season will be somewhere around 70 lakh bales,” said Mr Lal, the former MD of CCI.

It may be noted that both the agencies have recently been provided with export concession of Rs 1,000 by the Centre. But still they are facing resistance in the export markets. “Both on prices as well quality aspects, these stocks are not finding the adequate support from the forces in the current market. This is certainly a matter of concern,” said an observer.

When asked about the overall quality of cotton in the present season, Mr Jhunjhunwala said, “So far we have not received any complaint and hence we can say that quality is quite acceptable. In fact, we had asked the Indian Cotton Mills Federation (ICMF) to carry out a survey in this regard. According to them mills seem to be satisfied with the quality.”

Meanwhile, the Maharashtra government has claimed that the state department has seized spurious Bt cotton worth Rs 64 lakh from the cotton belts of Vidharbha, Jalna and Nanded. Experts are of the view that there is an urgent need to curb the supply of spurious Bt seed or else it will adversely affect the acceptance of this technology. “Admixing and supply of spurious seed will certainly bring bad name to this proven technology. We have already seen as to how some of the environemental groups are up in their arms to protest this technology in the country,” an observer said.

SICA News Letter
UPCOUNTRY SPOT RATES PER QUINTAL IN RUPEES (16-06-2005 to 30-06-2005) excluding intervening holidays
June 2nd Fortnight
Sl. Varieties	State	16	17	18	20	21	22	23	24	25	27	28	29	30	High	Low	Avg.
2004-05 Crop
1. Bengal Deshi Fine	G.Ngr	3496	3496	3496	3496	3496	3496	3496	3496	3496	3496	3496	3496	3496	3509	3496	3502
3. V.797, 22 mm	G	3318	3318	3318	3318	3318	3318	3318	3318	3318	3318	3318	3318	3318	3318	3178	3261
4. Jayadhar, 22 mm	K	3684	3599	3599	3599	3599	3599	3599	3599	3599	3599	3599	3599	3599	3684	3599	3645
5. J-34, SG, 24 mm	Bhatinda	4420	4420	4420	4420	4420	4420	4420	4420	4420	4420	4420	4420	4420	4420	4420	4420
8. Mech-1/H-4, 28mm	MP	4584	4584	4584	4584	4584	4584	4584	4584	4584	4640	4640	4640	4640	4640	4555	4587
9. LK, 29 mm	AP	4668	4668	4668	4724	4724	4724	4724	4724	4724	4724	4724	4724	4724	4724	4668	4690
10. Shankar-6, Mer, 28 mm	G	4780	4780	4780	4780	4780	4780	4780	4780	4780	4837	4837	4837	4837	4837	4724	4763
11. MCU-5, 32 mm	AP	5202	5202	5202	5202	5202	5202	5202	5202	5202	5230	5230	5230	5230	5230	5202	5296
12. DCH -32, 34 mm	K	8436	8436	8436	8577	8577	8577	8577	8577	8577	8717	8717	8717	8717	8717	8436	8512
13. MECH-1 Yeotmal/Amara	M	4499	4499	4499	4499	4499	4499	4499	4499	4499	4499	4443	4443	4443	4499	4443	4493
14. H-4 Yeotmal/Amara	M	4499	4499	4499	4499	4499	4499	4499	4499	4499	4499	4443	4443	4443	4499	4443	4493
15. LRA-5166 Ngp/Yeotmal	M	4218	4218	4218	4218	4218	4218	4218	4218	4218	4218	4162	4162	4162	4218	4162	4212
16. NHH-44 Ytl/Amravati	M	4049	4049	4049	4049	4049	4049	4049	4049	4049	4049	3993	3993	3993	4049	3993	4043
17. AK.H-4/AK.235	M	3937	3937	3937	3937	3937	3937	3937	3937	3937	3937	3881	3881	3881	3937	3881	3931
18. 1007 YTL/AMT	M	4218	4218	4218	4218	4218	4218	4218	4218	4218	4218	4162	4162	4162	4218	4162	4212
19. AHH-468 YTL/AMT	M	4106	4106	4106	4106	4106	4106	4106	4106	4106	4106	4049	4049	4049	4106	4049	4099
G - Gujarat; AP - Andhra Pradesh; K - Karnataka; M - Maharashtra; MP - Madhya Pradesh
Note : The official spot rates fixed and registered by the South India Cotton Association are for Upcountry spot rates.