Have been thinking to write on this subject since Monday, March 5th 2012 - the moment Director General of Foreign Trade (DGFT) issued notification and Press Information Bureau (PIB) issued press-release on same - http://pib.nic.in/newsite/erelease.aspx?relid=80719, but being a journalist reporting business again a Gujarati who believes in "Tel juvo ane Tel ni Dhaar juvo [Meaning : Wait and Watch] ..." - I preferred to wait and watch, as to how and in which manner the directive is perceived and what reactions are expected against this action.
Thumb-rule of any commodity, be it agri, metal (precious or base), energy - prices move up if demand increases against the supplies and prices go down if supply is in excess of demand. But what has happened to Cotton?
Prices of 1 candy (in international markets cotton is traded in candies, approximately 356 kilos per candy) which was 60,000+ rupees last fiscal at the same time has today scaled down to 30,000+ rupees this fiscal at the same time, it means either the supply of commodity is in excess or the demand of commodity is low, a logical conclusion by an aam-aadmi (mango people).
As per the data reflected in DGFT's Press Release on YoY (Year on Year basis, for fiscal 2010-2011 and 2011-2012), Supplies display an increasing trend. Opening stock, Crop, Import all put together show an increasing trend in supply. As against this the demand shows substantial decrease, especially the mill-consumption, but the sign of worry is out of non-mill consumption, which has grown drastically - almost 10 times, as compared to last year.
Out of total expected arrival of 340 Lakh bales, till now 245 lakh bales have already arrived in markets in India. From the arrived stock 94.75 lakh bales have been exported till 4th March 2012, as against 120 lakh bales registered for exports and ban on exports of cotton from government comes at such time.
If you take a look at exports data which is hardly projected to grow in tune of 5% over last year, as India Exported 80 Lakh Bales last year and expects exports of 84 lakh bales this year, but all of a sudden Export data has alarmed the government in power.
India is the world's second largest cotton exporter after the US and has already exported nearly 9.475 million (94.75 Lakh) bales in the current marketing year, according to the Indian Cotton Federation. The figure is well above the government’s full-year forecast of 8.4 million (84 Lakh) bales, as exporters took advantage of the price differential amid firm overseas demand, specifically from China, as China alone accounts for more than 70% of India's cotton exports.
The reason of banning exports of cotton is yet not clear, though reports fairly indicate that it was done to prevent China from hoarding cotton supplies and again Anand Sharma, India’s Commerce Minister who imposed the ban defended his decision, saying - "It was taken after surging exports raised fears of depleting domestic supplies..."
Most worried are none other than politicians of the nation themselves, as you can see almost 500+ NEWS articles while you search "Ban on Cotton Exports in India" on Google.com.
Surprisingly all politicians, irrespective of their party, their political agenda and political differences, call it the NCP's Agriculture Minister Sharad Pawar himself, Congress led Government's Maharashtra Chief Minister Prithviraj Chavan, Congress led Government's Andhra Pradesh Chief Minister N. Kiran Kumar Reddy or BJP led Government's Gujarat Chief Minister Narendra Modi - everybody has raised their voice and expressed their concern by writing letter to Prime Minister Dr Manmohan Singh, to re-consider the ban of exports on cotton, but the BIG QUESTION is for whom?
But obviously for the farmers, who else? - Our politicians can resort to all sort of political gimmicks to garner vote-bank in name of communal sentiments, undertake all kinds and modes of corruptions, (now a days even watch porn-flicks while the session in house is in progress) but when it comes to FARMERS, boss - HUM SAB EK HAI, we all are one, when it comes to the sentiments of our own KISAAN.
As again the para 5 of the press release from DGFT on PIB says, "Cotton Corporation of India has been advised to protect farmer’s interests by procurements in all mandis of India where the prices fall below MSP prices. Textiles Mills have also commenced procurement operations across the country. The price situation is unlikely to be adversely affected by the current decision for long." - the message is pretty loud and clear, that nothing at the cost of farmers.
Thank God in times of CWG, Adarshs, 2Gs, 3Gs, 4Gs, Viral Music Marketing Strategies (Why this Kolaveri, Kolaveri, Kolaveri D), Cheap Tablets (PCs), inclusive growth, education for all, Lokpal, declining gas supplies, political surprises and especially in this scenario where real estate and land is the prime-concern for "ZAMEEN SE JUDI HUI RAAJNEETI" (Grass-root level politics), atleast there is still a common (POLITICAL) consensus that we as a NATION are still AN AGRICULTURE ECONOMY and leaving everything apart, our FARMERS are indeed important for us.
But coming back to ban, a little hatke from the politics over ban, so in this scenario - where cotton supplies are in excess against the expected demand, but obviously prices of cotton are expected to go down and especially when similar scenario exists globally, in world markets also prices of cotton are not expected to improve.
With India banning exports of cotton, if the supplies from India are to dent the global supplies, prices of cotton should have improved in international market, as with Government directive supplies from India were to go short - but so did not happen !!! instead prices still dropped down on an "OPTIMISTIC SENTIMENT" that India will lift the ban on exports of Cotton - SURPRISED?
On contrary other global economies are keen to take this ban of India on Cotton Exports to their advantage, as majority of the cotton traders from India will fail to fulfill their trade contracts and commitments. Australian Agriculture Minister, Joe Ludwig has said, that - "India's ban on cotton exports opens up opportunities for Australian cotton farmers," - but why this ban is an ultimate question?
Buzz in the market is that ban on exports of cotton will be revoked, may be as the Finance minister presents budget in the parliament on 16th March 2012, there might be some pre-farmer policies also announced or some correction in Minimum Support Prices (MSP) given to farmers, but would this all really reach the farmer?
And the answer yet remains unanswered because at an end of the day,
- For an Activist : Number of suicides committed by farmers growing cotton in India is increasing alarmingly.
- For an Economist : If cultivation and production of cotton in increasing, than which link in the supply chain is missing, where still the nation is struggling as far as the growth from Agriculture sector is concerned?
- For a Politician : Nothing anti-farmer, even if farm income is spared from income-tax
- For an Analyst : When all governments in power irrespective of their political differences are busy protecting interest of farmers or are busy projecting themselves to protect the interest of the farmers by providing appropriate Minimum Support Price (MSP) for their produces, all possible agriculture subsidies and immediately registering their voice, when anything is anti-farmer, still agri commodity driven inflation cannot be ruled out.
- For an Urban Consumer : WTF, why prices of my pair of denim is increasing, despite the fact that cotton supplies are high this year?
- For an International Food Company : We are expecting our next growth story to come out from India and China
- For a retail store / food chain : Buy one Get another free
- For a speculator : Bull / Bear - we will bail out
- For a Scribe (Journalist) : Deadline is important
Follow us on :-
Access us on :-
E-Mail : firstname.lastname@example.org