COTTON
Multi Commodity Exchange of India Limited (MCX) is a state-of-the-art commodity futures exchange
based in India. The exchange facilitates online trading in commodity futures contracts across segments,
including bullion, base metals, energy, and agricultural commodities, besides offering clearing and
settlement services. The exchange thus provides an effective mechanism for price risk management.
INTRODUCTION
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Cotton is essentially grown for its fibre, which is used the world-over in textile manufacturing and
accounts for around 35 per cent of the total textile fibre used in the world.
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Its strength, absorbency, and capacity to be washed and dyed, make cotton an adaptable raw material
for producing a variety of textile products, such as clothes, space suits, household items and industrial
products.
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Cotton is classified based on staple, grade, and character of each bale—staple refers to the fibre length;
grade ranges from coarse to premium and is a function of colour, brightness, and purity; and character
refers to the fibre's strength and uniformity.
GLOBAL SCENARIO
MCX is a leading
commodity
exchange in India,
with a market
share of 84.06%*
(2014-15)
*In terms of the value of commodity
futures contracts traded
(Source: FMC Data, May 2015 )
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Cotton production and trade is widely spread across the world, with more than 80 nations cultivating
the crop. However, its production, consumption and trade are dominated by a few nations.
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The world cotton production in 2015–16 is expected to be 26.09 million metric tonnes (MMT)
(153.5 million bales of 170 kg each) as compared with 25.96 MMT (152.70 million bales of 170 kg each)
in 2014–15.
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The world's four largest cotton-producing countries are India, China, the U.S., and Pakistan. They
account for nearly 70 per cent of the world's production. The other major producers include Brazil and
Uzbekistan.
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The top two consumers of cotton are China and India (more than 50 per cent) of the world's
consumption, which is estimated to be around 23.44 MMT. Pakistan, Turkey, Bangladesh, the U.S.,
Indonesia, Vietnam, and Uzbekistan are the other major consumers.
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In the recent years, global trade has been around 7–8 MMT.
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The U.S. is the largest exporter of raw cotton, accounting for over one-third of the global trade; China is
the largest importer.
World cotton production, 2014–15
Other countries 18%
China 23%
World cotton consumption, 2014–15
Other countries 15%
China 32%
Uzbekistan 2%
Vietnam 3%
Uzbekisatn 4%
Indonesia 3%
Brazil 6%
The U.S. 3%
Bangladesh 4%
Pakistan 9%
India 27%
Turkey 6%
The U.S. 13%
Pakistan 10%
For private circulation only.
Source: ICAC; release dated April, 2015
India 22%
INDIAN SCENARIO
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India's annual production of cotton has been steadily increasing in the recent years supported by a rise
in acreage, better genetically modified seeds, and improved practices.
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India’s estimated production is 39 million bales of cotton in 2014–15 crop year. The acreage in 2014–15
was 12.65 million hectares and a yield of 537 kg/ha, as against the world average of 804 kg per hectare.
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In India, cotton is sown during March–September and harvested during September–April. The new
marketing season commences from October every year.
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India's cotton consumption increased by 15 per cent from 21.9 million bales in 2005–06 to 25.5 million
bales in 2011–12. This is estimated to have further increased to 32.0 million bales in 2014–15 crop year.
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Gujarat, Maharashtra, Telangana, and Andhra Pradesh are the major producers of cotton, accounting
for over 71 per cent of the total production.
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India has been a major exporter of cotton since 2005–06, and currently, the world's second largest
exporter. It is estimated that India had exported 7 million bales of cotton in 2014–15.
Cotton balance sheet
Item
SUPPLY
Opening stock
Crop size
Imports
Total availability
DEMAND
Mill consumption
Small mill consumption
Non-mill consumption
Total consumption
Export
Total disappearance
Carry forward
(in lakh bales of 170 kg each)
2013-14
2014-15*
40.00
398.00
10.80
448.80
32.00
390.00
8.00
430.00
266.00
24.88
8.00
298.88
117.92
416.80
32.00
278.50
26.50
15.00
320.00
70.00
390.00
40.00
* Estimated by CAB in its meeting held on 31st March 2015
India’s major cotton-producing states
Punjab 4%
Rajasthan 4%
Madhya Pradesh 5%
Haryana 6%
MCX is
India’s 1st
listed exchange
Gujarat 29%
Karnataka 8%
Andhra Pradesh 7%
Telangana 15%
Maharashtra 22%
Source: Cotton Advisory Board
FACTORS INFLUENCING THE MARKET
www.mcxindia.com
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The domestic demand–supply scenario, inter-crop price parity, cost of production, and international
prices are the major factors influencing cotton prices.
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Weather, pests, diseases and other risk factors associated with agricultural crops also have a bearing on
production.
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Government policies on import, export, and minimum support price are significant influencers of
cotton prices.
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Cotton yarn prices in different markets across the country show a correlation of above 90 per cent with
India's raw cotton prices.
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Global trade is particularly important for cotton. In addition to around 30 per cent of the global cotton
fibre produced being traded, it is also traded indirectly as yarn, fabric, and clothing.
24000
60000
22000
50000
Price in `/bales
20000
40000
18000
30000
16000
20000
14000
Volumes & OI in MT
MCX Cotton volumes & open interest
10000
12000
10000
Oct-11
Apr-12
Oct-12
Apr-13
Oct-13
Apr-14
Open interest
Volumes
Apr-15
Oct-14
0
Oct-15
Close
Source: MCX
ICE & MCX cotton correlation
110
22000
90
20000
80
18000
70
16000
60
14000
50
12000
ICE (cents/pound)
100
40
Oct-11
Apr-12
Apr-13
Oct-12
Oct-13
ICE closing price
Oct-14
Apr-15
10000
Oct-15
MCX closing price
Source: Bloomberg
ICE cotton 3-month price vs. ICE stocks
(including CTCL)
(FY 2014-15)
200000
180000
160000
140000
120000
100000
80000
60000
40000
20000
0
Oct-11
110
100
90
80
70
60
Apr-12
Oct-12
Apr-13
ICE stocks
Oct-13
Apr-14
Oct-14
Apr-15
ICE prices (Cents/Pound)
ICE stocks (million Pounds)
MCX reaches
out to over
1,900 cities
and towns in
India through
4,80,000+
trading terminals
Apr-14
MCX (`/ bales)
24000
50
Oct-15
ICE closing price
Source: Bloomberg
IMPORTANT WEBSITES
www.cotcorp.gov.in | www.caionline.in | www.citiindia.com | www.icac.org | www.fcamin.nic.in |
www.agriccop.nic.in | www.futuresource.com | www.dowjones.com | www.fas.usda.gov
CONVERSIONS
1 Indian bale
1 Indian candy
100 Indian bales
1 US bale (480 pound)
www.mcxindia.com
170 kg
355.62 kg of lint cotton
Approx. 48 candy
217.7 kg
CONTRACT SPECIFICATIONS OF COTTON - SALIENT FEATURES
Symbol
COTTON
Description
COTTONMMMYY
Trading Session
Monday to Friday: 10:00 am to 09:00 pm / 09:30# pm
Trading Unit
25 bales
Quotation/Base Value
` per bale (of 170 kg)
Maximum Order Size
1200 bales
Tick size
(minimum price movement)
` 10
Price Quote
Ex-Warehouse Rajkot (Within 100 km radius) excluding all taxes,
duties, levies, charges as applicable.
Daily Price Limits
The base price limit will be 4%. The daily price limits shall be relaxed
in accordance with provision of circular no. MCX / T&S / 004 / 2015
dated January 5, 2015.
Initial Margin
Minimum 5% or based on SPAN, whichever is higher
Maximum Allowable
Open Position*
For individual clients: 1,50,000 bales (75,000 bales)* or 5% of the
market wide open position, whichever is higher.
For a member collectively for all clients: 15,00,000 bales (7,50,000
bales)* or 20% of the market wide open position whichever is higher.
MCX is the first
commodity
exchange in India
to launch mini
futures contracts
in various
commodities
Delivery Unit
100 bales (170 quintals or 48 candy approx.) +/- 7%
Basis Delivery Centre
Rajkot (Gujarat)
Additional Delivery Centres
Yavatmal/Jalna/Jalgaon (Maharashtra), Kadi (Gujarat), Bhatinda (Punjab),
Sirsa (Haryana), Beawar (Rajasthan), Guntur (Andhra Pradesh), Raichur
(Karnataka)
The discounts with respect to transportation charges from each of the
additional delivery centres to the basis delivery centre (Rajkot) will be
announced by the exchange before the launch of the contract.
Quality Specifications
physical inspections
and HVI Mode
Ginning Pattern: Roller Ginned Cotton, Saw Ginned Cotton will be on
accepted with discount
Basis Grade: Standardised grade as per HVI Middling 31-3, grades
between 11-1 and 42-3 are accepted with premium/discount
Staple 2.5% span length: 29 mm (+/- 2mm) with premium/discount.
MIC: 3.6 - 4.8 (+/-0.1) with discount
Trash: 3.5% (+/-1.5%) with premium/discount.
Moisture: Upto 8.5% (acceptable upto 9.5 at discount)
Delivery Logic
Compulsory Delivery
Delivery Period Margin
25%
Due Date Rate
The Due Date Rate (DDR) shall be arrived at by taking the simple
average of the last three trading days’ polled spot prices of Rajkot.
# US daylight saving timings
*Near month
Note: Please refer to the exchange circulars for latest contract specifications
* Genuine hedgers having underlying exposure that exceed the prescribed OI limits given in the contract specifications can be allowed higher limits based
on approvals.
This product leaflet is not intended as professional counsel or investment advice, and is not to be used as such.
While the exchange has made every effort to assure the accuracy, correctness and reliability of the information
contained herein, any affirmation of fact in the product leaflet shall not create an express or implied warranty
that it is correct. This product leaflet is made available on the condition that errors or omissions shall not be
made the basis for any claims, demands or cause of action. MCX shall also not be liable for any damage or loss of
any kind, howsoever caused as a result (direct or indirect) of the use of the information or data in this product
leaflet .
Multi Commodity Exchange of India Limited
Exchange Square, Suren Road, Chakala, Andheri (East)
Mumbai 400 093, Tel. no.: +91-22-6731 8888
Email id: [email protected],Website: www.mcxindia.com
CIN: L51909MH2002PLC135594
141015
Customer Support: +91-22-6649 4040 | To get the latest futures prices on mobile: visit http://m.mcxindia.com