Major cotton producers like China, India and Pakistan are taking measures to help cotton growers. They are reacting to falling cotton prices by market intervention or insulating farmers by offering subsidies.

Cotton prices have fallen 25 to 30 per cent across markets. Cotton-2 contract, which is traded on global exchanges and is a benchmark for global prices, peaked around May 5th this year, and has fallen 30 per cent since then. India, China and Pakistan together produce 60 per cent of the world’s cotton.

China has cut cotton purchases significantly. The Cotton Corporation of India has been actively buying under a market intervention scheme and has also beefed up storage for which the government has arranged a line of credit. The Trading Corporation of Pakistan, which has not purchased cotton since 2005-06, will buy about one million bales of lint this month at the announced minimum support price.

Cotton consumption, especially by mills, is projected to go up this season. However, in most places, mills are waiting for prices either to fall or stabilize. The situation is the same in India as cotton will be available cheap for some more time and mills are in no hurry to buy now.