Ahmedabad/Rajkjot, 1 December 2014

Cotton farmers are today holding a meeting in Rajkot to take decision on their future actions on the issues of cotton support prices. The meeting is scheduled to take place at 10.00 am at Bahumali bhawan in Rajkot which is considered the capital of Cotton growing Saurashtra region. Farmers rally from Bahumali bhawan at around 11.00 am and reach Collector office at 11.30 am to submit a memorandum demanding increase in Minimum Support Price(MSP) for cotton.

Farmers believe that due to increased input costs, they deserve hike in MSP also. They say, the present MSP of Rs. 850/20 Kg is not enough, as input cost has been around Rs. 900/20 Kg. They demand MSP at around Rs. 1250.

However fair observation concludes that input cost for 20 Kg. cotton has been around Rs. 750(and not Rs. 900 as farmers claim).

Rashtriya Swayamsevak Sangh(RSS) led farmers organization ‘Bharatiya Kisan Sangh’ is leading the movement of farmers on this issue. Kisan Sangh recently organized a successful rally in Amreli and other districts.

Farmers say, the season of cotton is here to stay just for next fortnight or so, and therefore the government needs to take quick decision on MSP.

Why Cotton prices are down in market:

Cotton prices dropped to the lowest in almost five years as China moved to limit imports.China, the world’s largest importer and grower, said this week it will restrict shipments for 2015 because of record inventories.After imports jumped to a record 24.53 million bales in 2012, the country will reduce purchases in 2015 for a third straight year to 8 million, the lowest since 2009, the USDA estimates. That’s compounding a global surplus, with inventories equal to 95 percent of annual use, the most ever. The 106.2 million bales of stockpiles is enough to make 22.85 billion pairs of jeans, or 3.2 for every person on the planet. The Chinese government said last month that its import quota will be capped at 4.1 million bales, the amount required by the World Trade Organization. The government probably will sell 2 million to 3 million tons from state reserves annually to ease a domestic surplus, the International Cotton Advisory Committee said Sept. 2. The government sold 300,000 tons in August, cutting state reserves to about 50.5 million bales, it said.

Plunging imports from China means that the world will see a fifth straight year of cotton surpluses, the longest stretch since 1999, even as global output drops for a third year and demand increases 4.1 percent, the most since 2010, USDA data show.

“There’s more cotton than the world needs,” said John Flanagan, the president of Flanagan Trading in Fuquay-Varina, N.C. “The world does not want as much as cotton as we are trying to sell. Prices have to go low enough to discourage planting acres. If not, they are probably going to go even lower by next summer.”

Technically, how Minimum Support Price(MSP) is decided:

The cost of inputs is covered in the cost of production estimated by the Government through cost of cultivation survey. The effect of rise in cost of cultivation of major crops is balanced through the mechanism of Minimum Support Prices (MSP). MSP is in the nature of a minimum guaranteed price offered by the Government to the farmers for their produce. MSPs have increased significantly in recent years.

Government fixes Minimum Support Prices (MSPs) of various crops on the recommendations of the Commission for Agricultural Costs & Prices (CACP), views of State Governments and concerned Central Ministries/Departments and other relevant factors. The Commission for Agricultural Costs & Prices (CACP) holds consultations with all stakeholders including farmers’ representatives and State Governments before finalizing the recommendations on Minimum Support Prices (MSPs). Government fixes MSP for the agricultural produce on the recommendation of the CACP and the views of the States and concerned Central Ministries.

The estimates of cost of cultivation/cost of production are collected through a Comprehensive Scheme for Studying the Cost of Cultivation of Principal Crops. These data are collected with the help of State Agricultural Universities and Agro-Economic Research Centres. These estimates take into account real factors of production and include all actual expenses in cash and kind incurred in production by the farmer. Since the actual availability of data involves time lag, various components of cost are projected by the CACP for the ensuing season of the crops, after taking into account the changes in prices of different inputs subsequent to the period to which the data pertain.

Cotton MSP price doubled in last 9 years

MSP of medium staple cotton (Staple length(mm) of 24.5-25.5 and micronaire value of 4.3-5.1) has increased from Rs. 1770 in year 2006-07 to Rs. 3750 in 2014-15. Similarly MSP of Long staple cotton(Staple length(MM) of 29.5-30.5 and micronaire value of 3.5-4.31) has increased from Rs. 1990 in year 2006-07 to Rs. 4050 in year 2014-15.Thus the MSP of cotton has doubled in last 9 years.