Cotton Price Crash Hits Ginners.

Prices have fallen 30 per cent in two months, 50 per cent ginners in Gujarat shut shop.

The recent fall in cotton prices has taken its toll on ginners who convert cotton into bales form by ginning and pressing. Around 50 per cent of ginners in Gujarat, the largest producer and exporter of cotton, have closed their units in wake of spiralling prices. Most of the ginners had stock cotton in anticipation of further rise in prices.

Cotton prices were at Rs 63,000 a candy two months ago and have now crashed nearly 30 per cent to Rs 43,000 a candy in Mumbai. Cotton was among the best performing assets in 2010 with over 60 per cent returns.

“Ginners bought cotton even when prices were as high as Rs 60,000 per candy. They expected the prices to go up to Rs 65,000 per candy. However, the crash in prices has eroded the value of their stocks by 25 per cent,” said a ginner based at Kadi in north Gujarat.

According to him, ginners are poised for a big loss. “Ginners can only mitigate their losses if the government allows exports,” he added.

“Currently, the demand is less in the market and ginners are loosing about Rs 18,000-20,000 per candy. Most ginners had piled up the inventory when the demand was at its peak in February. Ginners anticipated higher returns but as the demand from millers decreased, prices fell from Rs 62,500 to Rs 44,000 per candy,” said Bharat Vala, president, Saurashtra Ginners Association (SGA).

He further added, “We will meet the concerned ministry officials on Wednesday to demand to extend the cap on cotton exports. Bhartiya Kisan Sangh and other farmers’ associations are also supporting us.” In order to pressurise the government, ginners have already gone on an indefinite strike from Sunday to protest against the cap of 5 million bales on exports.

Even as a large number of ginners have demanded to increase the quota for cotton exports, the industry experts find the move worthless considering the dismal price scenario in the international market.

“Currently, international prices are hovering at around 132 cents per pound of MOP cotton. This has dropped from as high as 192 cents per pound this season. In the present scenario, there is no incentives for cotton exports as the margins have dropped from 15-20 cents to barely 2-3 cents per pound,” said a cotton exporter from Ahmedabad. In domestic markets, the price of Shankar-6 variety hovered in the range of Rs 43,000-45,000 per candy against the peak of Rs 60,000 per candy a couple of months back. Prices have almost bottomed out in recent trades.

“Traditionally, ginners used to sell off cotton with a margin of Rs 2,000 per candy. They, however, did not offload their stocks even at the time when they were getting a margin of as high as Rs 4,000-6,000 per candy. Ginners expected prices to go up further. On the contrary, the prices plummeted by around Rs 10,000 per candy in the month of April hitting the margins hard,” said a leading cotton trader from Ahmedabad.

Anand Popat of Jalaram Cotton and Proteins Limited and secretary of SGA, said, “Ginners have a backlog of around 2 million bales and the farmers are also holding an equal amount. The government should allow export of at least 1.5 million bales more.”

Saurashtra and Gujarat are having around 1,000 ginning units. Before going on strike, 70 per cent ginning units were closed and the remaining worked at reduced work days of three-four days a week.

Source : Sify.com