Cotton Prices: Current Trends and Farmer Expectations

In Maharashtra, the nation's leading cotton-producing state, farmers face uncertainty about whether to sell or store their cotton. While current prices in most mandis exceed the Minimum Support Price (MSP), farmers anticipate even higher prices. Cotton prices have been dropping for the last two months. But farmers believe that low production will drive prices up later this year. This expectation has led to a decrease in mandi arrivals.

Market Analysis and Recent Price Trends

According to the Cotton Association of India (CAI), the price of Shankar 6 cotton has decreased by about 8 percent over the past two months, falling to $1,92 per kg from $2,09 per kg on March 15. A year ago, the price for Shankar 6 was $2,01 per kg. SMC Research attributes the continuous price drop to signs of softening in the global cotton market. Particularly influenced by better crop conditions and active sowing in the US, as reported by the NASS Crop Progress Report.

As of the first week of May, 24 percent of US cotton had been sown, 4 percent more than the previous year and the five-year average. Domestic cotton prices in India are expected to rise due to increasing export demand and declining arrivals.

Export Dynamics and Future Price Predictions

The latest CAI estimate indicates a 137 percent increase in exports to 1.8 million bales between October and March, compared to 0.759 million bales during the same period last year. This surge in exports, coupled with the fact that 28.06 million bales out of the 32.31 million bales produced in 2023-24 have already arrived, suggests a potential decrease in arrivals.

Despite recent declines, the futures market shows no significant price changes. However, farmers believe that, like in 2021 and 2022, prices could range from $1,08 to $1,44 per kg due to low production. Last month, cotton prices in some mandis reached $99.60 per quintal but have since stabilized at $0,84 to $0,90 per kg. The Maharashtra Agricultural Marketing Board reports the average price of cotton in the state’s mandis is currently $0,87 per kg.

Government Support and Future Outlook

The central government has set the MSP for long-fiber cotton at $0,84 and for medium-fiber cotton at $0,79 per kg. Farmers incur losses if prices fall below these levels. Presently, prices in most mandis align with the MSP.The Ministry of Agriculture estimates cotton production for 2023-24 at 32.311 million bales, slightly less than the previous year. The third advance estimate for 2022-23 was 34.347 million bales. Despite the expected decrease in production, farmers remain hopeful for a price increase.