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CCI auctions stockpiled cotton

With prices falling below minimum support price levels, the Cotton Corporation of India was spurred to actively enforce guarantees by purchasing the equivalent of nearly seven million 480-pound bales from domestic producers this season. The agency then stockpiled the fiber from November to March and last month began auctioning cotton at prices near MSP levels. However, the prices being offered have not been low enough to garner much offtake by Indian mills.

India, the world’s largest producer and second-largest seller of cotton, has a government support program in place that maintains and enforces a guaranteed price level for its producers (known as the minimum support price or MSP) by purchasing and stockpiling the fiber so as to help prevent domestic prices from crashing.

A major question for the local and global cotton markets is whether increasingly aggressive measures to move cotton from government hands include reductions in auction prices. The CCI has announced that a new set of auctions, which will be more open to international buyers, will be put into operation soon. The government is becoming more active in terms of its efforts to move cotton. This could be interpreted as the state’s stab at offloading inventory without having to lower prices much below the MSP rates it was purchased at, which isn’t likely to appease most domestic mills.

 
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