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MCX cotton stocks hit all-time high of 1,81,200 bales

KOLKATA: Cotton futures contracts on Multi Commodity Exchange of India (MCX) are gaining further traction with stakeholders, including ginners, traders, farmers and corporates.

Stock deposits in MCX accredited warehouses soared to a new all-time high of 1,81,200 bales as on March 5. This translates into a notable increase of 55.80 per cent from the earlier 1,16,300 bales.

Besides, cotton futures contract recorded second highest intraday volume of 3,70,700 bales valued at about Rs 764 crore as on February 22. Open interest on the day stood at 4,30,400 bales.

Since the launch in October 2011, MCX cotton futures contracts, with increasing domestic hedger participation, have demonstrated that it can meet the risk management needs of various stakeholders in the cotton ecosystem, with contract witnessing trade of more than 15.44 crore bales till date. With an internationally accepted technical specifications, the contracts have a deliverable range that represents more than 75 per cent cotton grown in India.

So far, through the exchange’s delivery mechanism, cotton to the tune of 9,77,200 bales has been delivered.

“The highest ever cotton deposit in MCX accredited warehouses once again reaffirms the confidence of the cotton stakeholders in the exchange’s well-equipped and robust warehousing and delivery mechanism for participants to tender and receive delivery. MCX cotton futures has been servicing the price risk management needs of market participants such as producers, ginners, millers, yarn manufacturers, exporters and the like, besides facilitating transparent price discovery,” said B S Rajpal, Vice President, Cotton Association of India (CAI) & Director, Manjeet Cotton Private.

Mrugank Paranjape, MD & CEO, MCX, said, “The record deposit of cotton stocks in MCX accredited warehouses is extremely comforting, and at the same time is a testament to the confidence and trust the stakeholders unabatedly pose in MCX. Further, the consistent popularity and robust performance of our MCX cotton futures in particular, is notable, with its increasing liquidity and depth. This amply demonstrates the contract’s ability to enable cotton stakeholders to effectively manage their price risk.”

According to Narendra Ahlawat, MD & CEO, Multi Commodity Exchange Clearing Corporation, the efficient exchange delivery settlement mechanism has been welcomed by the participants as evident from the record cotton deposits in Exchange’s accredited warehouses. It shows that the platform is not only providing efficient risk management tools to the stakeholders, but also facilitating a robust system for participants to tender and receive delivery.

India is a major player in the global cotton industry. It is one of the largest producers and exporters of Cotton, contributing about 24% and 13% to the global production and exports, respectively (USDA, Crop Year 17-18).

An estimate by Cotton Association of India puts the production at 36.5 million bales and imports at 1.5 million bales in 2017-18 crop year i.e. October to September. The CAI has estimated cotton crop for 2018-19 season at 330 lakh bales, a 9-year low. Given the annual Indian market size of cotton textiles at around Rs 60,000 crore and an annualised volatility of 16.5 per cent in cotton prices during 2018, the industry is exposed to a price risk of more than Rs 9,900 crore.

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