Pradeep Jain has been operating his ginning mill at only 10 percent of capacity even as India is set to become the world's biggest cotton producer with a record harvest. "Since prices have fallen below the minimum support price, farmers are not willing to sell their crop to private players," Jain said, pointing towards his empty warehouse, which usually overflows in November as harvesting gains pace.
A drop in global cotton prices to a five-year low due to slowing demand from China has hit India's cotton trade. Farmers, unwilling to accept the lower prices, are holding back on sales. The delay could keep Indian exports subdued in the next few months, providing some support to global prices and giving rivals, the United States and Brazil, an opportunity to increase their shipments.
The Indian state, meanwhile, is ramping up purchases from farmers and expects to accumulate more cotton than traders say India will be able to export this year. "We are planning to procure around 7.5-10 million bales (170 kg) of cotton in the crop year 2014/15," said B.K. Mishra, managing director of the state-run Cotton Corporation of India (CCI). That contrasts with 2013/14, when market prices were above the support level and the CCI bought just 440,000 bales.
The CCI is offering support prices of 4,050 rupees per quintal for long-staple varieties and 3,750 rupees for medium-staple varieties. It is expected to open 300 to 340 centres this year after the government asked it to accelerate procurement. India is likely to harvest a record 40 million bales this crop year, which started on October 1, and surpass China as the world's biggest producer. But Indian consumption is not enough to absorb the rising output, and China, the biggest buyer of Indian cotton, has been scaling down its overseas purchases.
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