Cotton futures trading on MCX to start soon: Textiles secretary

After the rise in cotton prices 100,000 per candy in August after unseasonal rains, speculative trading and global cotton shortage, the Securities and Exchange Board of India closed cotton futures on MCX to bring down prices. Cotton prices have now softened in line with global prices as demand has slowed down this year.

Textiles secretary Rachna Shah said in an interview, “The advantage with MCX is that it helps in price discovery and also takes the risk of hedging, and we think it should continue to function in that regard.” Addressing them, a Product Advisory Committee was constituted with representatives from the industry. The committee has worked with SEBI in terms of contract specification and quality standards. I very much hope that business will resume very soon in the future. Most of the issues are resolved now, and it’s really just a matter of time,” she said.

The committee was reconstituted under the chairmanship of T. Raj Kumar, president of the Confederation of Indian Textile Industry (CITI) amid price volatility and widening gap between Intercontinental Exchange Inc (ICE) and MCX. “The talks with MCX are in final stages and the new restructured contract should be out soon,” Kumar said.

Industry representatives said the ban was necessary to prevent speculative trading by some big companies, which pushed prices to record highs, it also took away price indicators for farmers who rely on futures trends provided by exchanges. were. As a result, farmers are hoarding cotton and the actual quantity in MCX godowns has fallen.

“Farmers are hoarding cotton as they are not sure of the price. Farmers give seed cotton to ginners and ginners give lint cotton to MCX. So, at the moment, the cycle itself is not starting due to lack of price discovery.’

Another person aware of the developments said some changes have been proposed, including incentives for ginners to put more cotton in MCX godowns.

“Till now, the actual quantity on MCX was less…largely for speculation and not for delivery. It has been proposed that those who want to put cotton in MCX warehouse should have some coverage of logistics cost ,” said the second person on condition of anonymity about the development.

The lack of price discovery led to a protest by farmers next to the SEBI headquarters in Mumbai on 23 January.

“Last year, when cotton prices rose, small farmers with less than 2 hectares did not benefit from the higher prices. And now, they have realized that the futures market is a way of getting informed. Manish Daga, farmer representative in the Product Advisory Committee and president of All India Cotton Farmers Producer Organization, said futures are a price discovery mode for farmers.

“Several changes have been proposed which will help in boosting liquidity. SEBI has opened after the farmer’s movement on 23 January. Farmers had warned of settling commodity futures in December. There were three months to resolve the issue, but now there is a gap in the contract,” Daga said.

Meanwhile, Textiles Secretary Shah said that the prices have come down and domestic and international prices are more or less at par. While domestic prices remain around 28% higher than the minimum support price, cotton prices in the country have come down to around 62,000 per candy as compared to international prices of Rs. He said 64,000-65,000 per candy.

“This committee consisting of leading ginners and cotton users supplying quality cotton to MCX is working to improve futures contracts, with the sole objective of making futures prices more representative and not speculative. Cotton prices There has been speculation, and this has led to a lot of volatility,” said Chandrima Chatterjee, general secretary, CITI.