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 = 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). = 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). = 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. = 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 ) = 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. = 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. = 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. = 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. = In the recent years, global trade has been around 7–8 MMT. = 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 = 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. = 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. = In India, cotton is sown during March–September and harvested during September–April. The new marketing season commences from October every year. = 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. = Gujarat, Maharashtra, Telangana, and Andhra Pradesh are the major producers of cotton, accounting for over 71 per cent of the total production. = 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 = The domestic demand–supply scenario, inter-crop price parity, cost of production, and international prices are the major factors influencing cotton prices. = Weather, pests, diseases and other risk factors associated with agricultural crops also have a bearing on production. = Government policies on import, export, and minimum support price are significant influencers of cotton prices. = Cotton yarn prices in different markets across the country show a correlation of above 90 per cent with India's raw cotton prices. = 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
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