African cotton scientists touring Pak research stations
The Multi Commodity Exchange of India Ltd (MCX) recently signed an agreement with the Northern India Textiles Mills’ Association (NITMA) in Ludhiana to jointly educate NITMA members and other relevant stakeholders on the use and benefits of cotton derivatives. Cotton constitutes about 59 per cent in the raw material basket of the Indian textile industry.
Started in November 2003, MCX is India’s first listed, national-level, electronic, commodity derivatives exchange.
The global cotton market has been marked by high price volatility and uncertainties, largely on account of factors beyond the control of any stakeholder group or even government.
An annualized volatility of about 13 per cent in cotton prices during 2017-18 was much more than the margins of most textile mills. These exemplify the dire need for them to hedge the price risk in order to protect their bottom lines, according to an MCX press release.
Textile millers also have a perceived need to access appropriate cotton prices which have been discovered in a transparent and regulated exchange platform with large and diverse participation.
All large textile mills in north India are associated with NITMA and the combined turnover of its members is approximately Rs 33,000 crore in the domestic market and 3,400 crore in exports.
According to MCX CEO Mrugank Paranjape, for more than six and half years now, MCX cotton futures have proven to be one of the most useful instruments for price discovery and risk management for multiple stakeholder groups across the cotton value chain, including cotton textile mills.
The preponderance of cotton as raw material in the textiles industry and continuing high volatility in cotton prices mean that it is imperative for the managers of cotton mills to create appropriate risk management strategies for ensuring business sustenance, the press release added. Tuesday, 15 May 2018