Cotton

Overview

• ▪ The use of cotton for fabric is known to date to prehistoric times; fragments of cotton fabric dated from 5000 BC have been excavated in Mexico and the Indus Valley Civilization. The Indus cotton industry was well developed and some methods used in cotton spinning and fabrication continued to be used until the industrialization of India. Between 2000 and 1000 BC cotton became widespread across much of India. For example, it has been found at the site of Hallus in Karnataka dating from around 1000 BC.
• ▪ Cotton is essentially grown for its fibre, which is used the world-over to make textile. Cotton fibre is one of the most important textile fibres, accounting for around 35% of the world's total textile fibre used. Cotton's strength, absorbency, and capacity to be washed and dyed also makes it adaptable to a considerable variety of textile products. Cotton seed is crushed to make cottonseed cake, which is used in livestock feed; and cottonseed oil which is the 5th major edible oil consumed in the world. Cotton is classified according to the staple, grade, and character of each bale—staple refers to the fibre length; grade ranges from coarse to premium and is a function of colour, brightness and purity; and character refers to the fibre's strength and uniformity.
• ▪ The realities of the market call for efficient risk management techniques that are important for stakeholders, such as producers, exporters, marketers, processors, and SMEs. When the future is unknown, modern techniques and strategies, including market-based risk management financial instruments like ‘Cotton Futures’, offered on the MCX platform can improve efficiencies and consolidate competitiveness through price risk management.

Factors Influencing the Market

• ▪ The domestic demand supply scenario, inter-crop price parity, cost of production, and international price situation are the major factors that influencing prices in the market.
• ▪ Weather, pests, diseases and other risk factors associated with agricultural crops also have a bearing on cotton production.
• ▪ Government policies on import, export, and minimum support price are significant influencers of cotton prices.
• ▪ Cotton yarn prices in different markets across the country show a high correlation of above 90% with India's raw cotton prices.
• ▪ Global trade is particularly important for cotton. In addition to around 30% of the global cotton fibre produced being traded, it is also traded indirectly as yarn, fabric and clothing.

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