MCX is a leading commodity exchange in India, with a market share

KAPAS
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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Kapas (also known as raw cotton or seed cotton) is the unginned fibrous substance covering an
underlying seed that is plucked from the cotton plant (Genus Gossypium).
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Raw cotton (Kapas) is basically grown as a cash crop. Cotton staples are obtained by ginning of kapas
(raw cotton). Ginning is a process, which separates the lint (about 1/3rd in weight) from the seed
(about 2/3rd in weight).
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Cotton staples are used as a raw material for making cotton yarn or thread, which is further weaved for
manufacturing various textile products and garments.
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Cotton seed is crushed to extract cottonseed oil, and cottonseed cake is the by-product of crushing.
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.
THE COTTON VALUE CHAIN
Raw Cotton
(Kapas)
Cotton Seed
(60-65%)
Cottonseed Oil
North
Punjab, Haryana
Rajasthan
MCX reaches
out to over
1,900 cities
and towns in
India through
4,80,000+
trading terminals
(including CTCL)
(FY 2014-15)
Cotton Lint
(35-40%)
Cottonseed Cake
Type of Crop
Sowing Months
Harvesting Months
Arrival Months
Central
South
Gujarat, Maharashtra,
Madhya Pradesh
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Medium & Short
Staple
Largely irrigated
Khariff
Apr-Sept
Sept-Mar
Oct-Apr
Andhra Pradesh, Tamil Nadu,
Karnataka
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Medium & Long
Staple
Largely rain-fed
HARVESTING
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Long & Extra Long
Staple
Largely rain-fed
SOWING
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
SALIENT FEATURES OF KAPAS CONTRACT SPECIFICATIONS
MCX is the first
commodity
exchange in India
to launch mini
futures contracts
in various
commodities
Symbol
KAPAS
Last Trading Day
Last calendar day of the contract expiry month. If last calendar day is a
holiday then preceding working day.
Trading unit
4 MT (200 maund of 20 kg each)
Quotation/ Base value
20 kg
Price quote
Ex-Surendranagar (excluding all taxes, levies, sales tax/ VAT, as the case
may be)
Tick size (minimum price movement)
10 paise
Daily price limits
The base price limit will be 4%. The daily price limits shall be relaxed in
accordance with the provision of circular no. MCX/T&S/412/2014 dated
December 30, 2014.
Initial margin
Minimum 5% or based on SPAN whichever is higher
Additional and/ or
In case of additional volatility, an additional margin (on both buy & sell
Special Margin
side) and/or special margin (on either buy or sell side) at such
percentage, as deemed fit; will be imposed in respect of all outstanding
positions.
Maximum
allowable open position*
For individual clients: 25,000 MT or 5% of the market wide open
position, whichever is higher.
For a member collectively for all clients: 2,50,000 MT or 20% of the market
wide open position, whichever is higher.
Near Month Limits
For individual clients: 12,500 MT or 5% of the market wide open position,
whichever is higher
For a member collectively for all clients: 1,25,000 MT or 20% of the market
wide open position, whichever is higher
Delivery Logic
Seller’s Option
Delivery unit
4 MT (200 maund) with tolerance limit of +/- 20 kg. The tolerance limit of
each maund would be 250gm. However, Exchange reserves its right to
alter/change the tolerance limit, in case it deems fit and proper.
Delivery center(s)
Within 50 km of the municipal limits of Kadi, Viramgham, Lakhtar, Limdi,
Surendranagar and Bawla
Variety of Kapas
Fair average Kalyan Cotton of Gujarat 13 variety and/ or V/ 797 variety,
which can be either handmade or machine made.
Delivery standards
Unginned and unpressed Raw Kapas bundled as per specifications given
by MCX.
Quality specifications
Delivery Samples must be certified by surveyors approved by MCX
confirming that the sample under reference pertain to the basis of quality
specified above.
Proportion of Cotton: Seed in the Kapas shall be 40: 60. If the ratio of
Cotton is within 2% tolerance limit (between 38% to 42%), it is acceptable
without any premium or discount. If the proportion of cotton is more
than 42%, the seller would get a proportionate premium for every
percentage. If the proportion of cotton is less than 38%, the seller would
be subject to a proportionate discount for every percentage. If the
percentage is below 36%, it is rejectable at buyer’s option.
Refraction will be acceptable upto 20 kg per 4 MT of Kapas.
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
201115
Customer Support: +91-22-6649 4040 | To get the latest futures prices on mobile: visit http://m.mcxindia.com