Awareness programme jointly organized by Adilabad Cotton Association & MCX
Adilabad (Telangana), February 22, 2016: Targeted towards educating the cotton value chain participants about the importance of risk management against cotton price uncertainty Multi Commodity Exchange of India Ltd. (MCX), and Adilabad Cotton Association jointly organized a programme in Adilabad on Sunday, February 21, 2016.
During the programme, the experts from MCX explained the participants about how commodity exchanges have been playing an important and critical role in helping the participants of the commodity ecosystem including cotton stakeholders, hedge their price risks and achieve their business objectives.
While briefing about the cotton contract, and its specifications to the market participants, the experts from MCX said, cotton contract with 25 bales as the trading unit has a basis staple length of 29 mm, with facility to deliver 27 – 31 mm at appropriate discounts/premiums. Based on internationally accepted technical specification of cotton, while the basis along with a deliverable range represents more than 75 per cent of the cotton grown in the country. The contract is a compulsory delivery contract with multiple delivery centers, spread across the major states, the experts stated.
Separately, the experts also briefed about how cotton stakeholders can safeguard themselves against the crop failures, and falling commodity prices by seeking loans against valid warehouse receipts.
Mr. Badruddin Khan, Senior Manager-Business Development, MCX said, “In the last few years MCX has already demonstrated its ability to meet the risk management needs of a wide spectrum of stakeholders in the cotton ecosystem. And now, when the cotton price volatility is at elevated levels, adopting risk management techniques is vital for all its stakeholders.”
Mr. Vinod Kumar, President, Adilabad Cotton Association said, “Price risk management tools offered by commodity exchanges such as MCX, ensures stability to the cotton industry by giving protection against uncertainty and volatility in commodity prices. Additionally these tools also support sustainability of businesses especially SMEs which play a major role in textile sector. Hence, the importance of risk management against cotton price uncertainty, is absolutely critical, and cannot be ignored.”
Stakeholders of the cotton value chain— millers, ginners, exporters, spinners—participated in huge numbers at the programme to make it a success.
Cotton accounts for a third of India’s farm sector GDP and is called ‘White Gold’ because of its importance in India’s economy. India has largest area under cotton (12 million hectares) in the world, which constitutes 7% of total agricultural area, surpassing China, according to the US Department of Agriculture (USDA). Given its annual Indian market size of Rs. 60,000 crore and an annualized price volatility of 17% in 2015, the stakeholders are collectively exposed to a price risk of more than Rs. 10,000 crore.
