Cotton Corporation of India continued to increase the cotton sales floor price after the active transaction in Aug, while reduced the sales discounts and restricted the trading volumes. This move makes CCI's cotton price advantage gradually disappear, and sales have weakened somewhat since Sep. With the relatively high cotton stocks of CCI and coming arrivals of new cotton, CCI still faces large selling pressure.
1. CCI's cotton stock sales policy has been significantly tightened
After CCI suspended cotton stock sales on Aug 24, it restarted the sales again on Sep 1, but the new terms and conditions for the cotton stock sales tighten obviously.
(1) The floor price continues to rise, and selling volumes decrease
According to the CCI announcement, the average floor prices of CCI's cotton stocks on Sep 7 is Rs. 35,340 per Candy for 2018/19 cotton and Rs. 36,600 per Candy for 2019/20, which are all increased by Rs. 100 compared to the price announced on Sep 1. Since the beginning of Aug, CCI has raised the price five times in less than one and a half months.
In addition, since mid-Aug, the selling volumes of cotton sold off by CCI continue to decrease, from 77,000 tons in mid-Aug to 60,000 tons.
(2) Discount continues to shrink
According to CCI’s latest announcement, there will be a maximum quantitative ceiling of 2 lakh bales per day and total sale of 10 lakh bales in a cotton season to any single buyer for sale of cotton bales. A discount of Rs. 300/- per candy in sale rate will be given to MSME spinning mills (Registered as MSME with office of Textile Commissioner)/KVIC Units & Co-operative Spinning Mills. However, there will be a quantity limit of 15000 bales in a cotton season for this segment (Excluding KVIC/Government Mills).
Compared with the previous discount, private textile mills/NTC mills and cotton traders no longer have the qualifications of 300 rupees/candy discount for 100 bales purchased. In addition, the number of single-day purchases and cumulative purchases has also been significantly suppressed. In other words, the threshold to enjoy the maximum discount has been significantly increased, cutting off the possibility of large transactions in a single day. On Sep 1 and 2, the CCI cotton stock sales were only 5,100 tons, which was a sharp drop compared to the single-day transaction volume in Aug.
2. CCI cotton stocks are still under pressure
According to the data tracked by us, as of Sep2, CCI has sold about 885,000 tons of cotton and about 1.071 million tons are still left. Maharashtra Cotton Federation has sold 162,000 tons of cotton and about 149,000 tons of cotton are still left.
The cotton stocks remain at a historical high level compared to the corresponding period of previous years. Besides, the new cotton will arrive on the market soon. According to the current transaction situation of CCI, it may take a long time for the remaining CCI inventory to be effectively sold.
Cotton Corporation of India continued to increase the cotton sales floor price after the active transaction in Aug, while reduced the sales discounts and restricted the trading volumes. This move makes CCI's cotton price advantage gradually disappear, and sales have weakened somewhat since Sep. With the relatively high cotton stocks of CCI and coming arrivals of new cotton, CCI still faces large selling pressure.
