India’s Minimum Support Price (MSP) has an important impact on the cultivation of all crops. Cotton MSP can provide cotton farmers with a 50% cost subsidy under normal yield conditions.
In 2020/21, India’s MSP is 5,825 rupees/quintal, which is higher than the previous year’s 5,515 rupees/quintal. Once the price of seed cotton is lower than the MSP, the Indian Cotton Company will purchase seed cotton at the MSP price.
In 2020/21, India’s CCI purchased a large amount of seed cotton, and then put the purchased seed cotton on the market as cotton prices rose, bringing great benefits to the industry. So far in 2021/22, Indian seed cotton prices have been higher than MSP, resulting in a significant reduction in CCI’s acquisition activities. CCI may soon release this year’s MSP. Considering that prices have been rising steadily in recent years and the cost of cotton planting has increased significantly this year, this year’s MSP is expected to continue to increase.
Last week, the ex-warehouse price of S-6 in India was 112 cents/pound, and the government has a lot of room to raise MSP. In the 2021/22 season, India’s cotton output is expected to reach 43-44 million bales (170 kg each), much higher than this year’s 36 million bales, which will greatly increase India’s cotton export supply, which may exceed 10 million bales. After a few years, U.S. cotton exports may once again encounter challenges from Indian cotton.
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