New Delhi, India - Trading in the newly launched, more representative Cotton Futures Contract has officially begun today, February 13, 2023, with the joint efforts of the Government of India, Multi-Commodity Exchange (MCX), and trade and industry stakeholders.
The launch of the new cotton futures contract at MCX on January 31, 2023 aimed to make the futures prices more representative and less speculative. The contract specification and quality standards were modified to achieve this goal. With the new futures contract in place, industry players now have a platform to hedge their risks from future price volatility, while farmers can use the reference price when making decisions on selling their produce.
During the cotton season of 2021-22, Indian cotton prices hit a high of over Rs. 100,000 per candy in May 2022, due to unseasonal rains, speculative trading, and a global cotton shortage. Concerns were raised about the lower open interest and speculation through the trading of cotton futures on the MCX, leading to distorted domestic cotton prices.
To address these issues, the Textile Advisory Group held its 2nd interactive meeting in July 2022, and the Product Advisory Committee of MCX was reconstituted and expanded to include representation from the entire textile value chain, from farmers to end-users, to curb speculative trading and price volatility. As a result, Indian cotton prices are now competitive and in line with global prices.
With the successful launch of the more representative cotton futures contract, the industry can look forward to a more structured system, real price discovery, and stability in cotton prices.
