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Telangana fears cotton price crash amid excess production

LiveMint logoLiveMint 04-10-2017 Yunus Y. Lasania

Hyderabad: With cotton being sowed on 49% of the cultivation area in Telangana, the state’s agriculture department is concerned about prices decreasing in the open market this year. International prices of cotton will also play a major role in deciding the crop’s prices this year, said senior officials from the department, who are monitoring the situation. Cotton produce in state-run agricultural market yards will begin arriving from next week.

For the first time since Telangana’s formation, the area of cotton cultivation in 2017-18 touched nearly 19 lakh hectares, which is more than 50% higher than the previous year’s 12.4 lakh hectares, which had yielded 24.7 lakh metric tonnes of the crop. This year, production is expected to touch 28 lakh metric tonnes, said a senior official from the agriculture department.

“Countries like China, Vietnam and Bangladesh which import cotton will set the prices. Depending on that, the prices will fluctuate in the open market. Traders get orders from abroad only after those countries assess their leftover stock from the previous year,” explained the official, who did not want to be named.

He added that the Cotton Corporation of India (CCI), which purchases stock from farmers at the minimum support price (MSP), has been requested to monitor the arrivals in state-run markets as well.

Another official from the agricultural marketing department, which runs the state-run market yards, admitted that this year’s excess production was a result of the “advice” farmers had been given last year (by the department) to not opt for cotton. “Because of that, production was a little less, and prices in the open market were higher than the MSP. Seeing that, farmers opted for cotton on a huge scale resulting in this unprecedented sowing this year,” she said, also not willing to be quoted.

In view of the situation, CCI is also expected to set-up 59 additional centres (84 existing) across the state. The minimum support price (MSP) for cotton for 2017-18 has also been revised to Rs4,320 per quintal, against the previous year’s Rs4,160. According to a note prepared by the agriculture department, after Maharashtra (42.06 lakh hectares) and Gujarat (23.36 lakh hectres), Telangana is the third highest in cotton cultivation, area-wise, in India this year.

The agriculture department official stated that CCI will start purchasing cotton once the arrivals start, mostly in November. “Problems will arise if the international market/demand reduces the price in the open market. Farmers are expecting good prices like last year when cotton was fetching about Rs5,500 per quintal. We don’t know what will happen once arrivals start coming in,” he added.

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