Trading in newly launched, more representative Cotton Futures Contract has commenced from 13.02.2023 with the collaborative approach of Government of India, MCX, trade & industry.
In order to make the futures prices more representative and not speculative, contract specification and quality standards has been modified and new cotton future contract has been launched at MCX on 31st January 2023.
It will help in real price discovery and also will provide a platform for the industry to hedge their risk from future adverse price volatility. Further, farmers would also be benefitted and will have reference price while taking a decision to sell their produce in the market.
During Cotton Season 2021-22, Indian cotton prices reached to its peak level of more than Rs. 100,000 per candy in the month of May 2022 following unseasonal rain, speculative trading and a global cotton shortage. Industry were raising the concern of lesser open interest and speculation through trading of cotton future contract on the multi- commodity exchange (MCX) and thereby distortion in domestic cotton prices.
The matter was raised during the 2nd interactive meeting of Textile Advisory Group (TAG) held on 14th July 2022 as a result of which, Product Advisory Committee of MCX was re-constituted and enlarged with representation of Textile Value Chain from farmer to end users (i.e. spinning mills) to make the system more structured as per domestic market to curb the speculative trading and volatility in cotton prices. Now, Indian cotton prices are competitive and in line with global prices.