September 24, 2022
  • September 24, 2022

MCX Cotton: the suspension does not satisfy the Indian textile industry

By on August 30, 2022 0
The Indian textile industry is not happy with the suspension of the January cotton contract at the Multi Commodity Exchange (MCX). Detailed deliberations will take place with the industry to modify its specifications. But industry experts believe there will be no respite from the volatility and speculation as future trading has not been halted for the previous month’s contracts.

Importantly, market regulator SEBI has suspended trading of all cotton futures from January 2023 and beyond on the country’s largest commodity exchange, MCX, for one month.

The Indian textile industry is not happy with the suspension of the January cotton contract at the Multi Commodity Exchange (MCX). Detailed deliberations will take place with the industry to modify its specifications. But industry experts believe there will be no respite from the volatility and speculation as future trading has not been halted for the previous month’s contracts.

MCX said in a statement: “As current regulations do not allow changes to open interest open contracts, the January 2023 contract and subsequent contracts will temporarily not be available for trading until that the revised contract specifications be finalized, which will be done in 30 days.”

The specifications will be revised after consultation with stakeholders, including members of the Textile Advisory Group, the statement added.

The exchange monitoring mechanism will be further strengthened and closely monitored to prevent any kind of market abuse in cotton contracts, the exchange said. The exchange planned to expand the Cotton Products Advisory Committee to include greater representation from value chain participants, including the textile industry.

However, industry experts believe that the industry value chain will not be relieved from the high volatility and speculation as the cotton contracts of previous months i.e. September, October , November and December 2022, will remain open for trade. The new crop will hit the market during these months, so there will be a high volume of trade. Non-consumer cotton traders will be free to play openly in the market.

A member of the Cotton Advisory Group said Fibre2Fashion“The Indian textile industry will face high volatility and speculation as future contracts in the months when the new crop hits the market, will be opened with the current specifications. The suspension of future contract trading from January will not bring any relief to the industry.” The member said it was too early to comment on the industry’s suggestions for changes to the Future of Cotton specifications, as deliberations on this did not have not yet started Meetings will take place within the industry with market regulators to agree on specifications.

Another industry source commented that there won’t be much difference with the changes in cotton futures specifications. The government must control the multinational agricultural companies that store a large amount of cotton. It is high time to maintain real-time and transparent cotton trade data.

A few months ago, there was speculation about stocks available from multinationals as cotton prices hit new highs. Industry experts had estimated that the multinationals had a stockpile of 40 to 50 lakh of 170kg bales. However, trade agency estimates were the opposite, indicating that it was the mills that were accumulating large stocks of cotton.

Fibre2Fashion (KUL) News Desk