COTTON

The Multi Commodity Exchange of India Limited (MCX) is a India-based state-of-the-art electronic
commodity futures exchange that facilitates online trading, and clearing and settlement of commodity
futures transactions, providing a platform for risk management. MCX offers trading in more than 40
commodity futures contracts across segments including bullion, ferrous and non-ferrous metals,
energy, and agricultural and agri-based commodities.
INTRODUCTION

MCX is a
leading
commodity
exchange in
India, with a
market share of
87%*

Cotton is essentially grown for its fibre, which is used the world-over in textile manufacturing.

Cotton fibre is one of the most important textile fibres, accounting for around 35% of the total textile
fibre used in the world.

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.

Cotton is classified on the basis of staple, grade and character of each balestaple 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
=

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 2012-13 marketing year (July August) is forecasted to be
26.25 million metric tonnes (MMT) (154.41 million bales of 170 kg each) as compared with 27.44 MMT
(161.35 million bales of 170 kg each) in 2011-12 marketing year.

The world's four largest cotton-producing countries are China, India, USA and Pakistan. They account
for nearly 79% of the world's production. The other major producers include Brazil and Uzbekistan.

The top three consumers of cotton are China, India and Pakistan, which together account for twothirds of the world's consumption, which is estimated around 23.3 MMT. Turkey, Brazil and the USA are
the other major consumers.

*In terms of the value of commodity

futures contracts traded

In the recent years, the global trade has been around 7-8 MMT.

(Source: Data maintained by FMC)

While USA is the largest exporter of cotton, accounting for over one-third of the global trade in raw
cotton, China is its largest importer.

(Q3 FY 2012-13)

World Cotton Production 2012-13

11%

10%

China

4%

31%

6%

36%

6%

India
USA
Brazil
Uzbekistan

16%

23%

Source: ICAC Release dated March 1, 2013

Other Countries

China
India
Pakistan

10%

Pakistan

9%

For private circulation only.

World Cotton Consumption 2012-13

East Asia & Australia

Europe, Turkey & Brazil

8%

USA & CIS

Other Countries

10%
20%

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 is expected to produce 33.4 million bales of cotton from an acreage of 11.61 million hectares in
2012-13 (October September).

In India, the yield of cotton is estimated to be at 489 kg per hectare against the world average of
766 kg per hectare.

In India, cotton is planted from the end of April through September, and harvested from October to
January, based on the time of sowing.

India's cotton consumption increased by 15% from 21.9 million bales in 2005-06 to 25.3 million bales
in 2011-12. This further increased to 27.0 million bales in 2012-13.

The states of Gujarat, Maharashtra and Andhra Pradesh are the major producers of cotton, accounting
for about 75% 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 likely to export 7 million bales of cotton in 2012-13.

India mostly imports Long and Extra Long Staple (ELS) cotton from the US, Egypt, and West Africa.

Cotton Balance Sheet

(Quantity in lakh bales of 170kgs)

Globally, MCX is
No.1 in gold
and silver,
No.2 in
natural gas,
and No.3 in
crude oil*

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

2011-12

2012-13*

45.77
353
12
410.77

40
340
25
405

217.68
24.63
16
255.31
127
382.31
28.56

245
22
20
287
81
368
37

Source: Cotton Advisory Board | * April 2013 estimate

*In terms of the commodity futures

contracts traded during CY 2011
(Source: Websites of exchanges

Indias major cotton producing states (2012-13)

and FIA data)

11%
7%

26%

Gujarat
AP

5%

Punjab

5%

Maharashtra
MP
Haryana

22%
Source: Cotton Advisory Board

www.mcxindia.com

24%

Others

FACTORS INFLUENCING THE MARKET

=

The domestic demand supply scenario, inter-crop price parity, cost of production and international
price situation are the major factors that influence prices in the market.

Weather, pests, diseases and other risk factors associated with agricultural crops also have a bearing
on cotton production.

Government policies with relation to import, export and Minimum Support Price are significant
influencers of cotton prices.

Cotton yarn accounts for around 70% of the total yarn production in India. Thus, the price of cotton is
a very important factor that influences the health of India's textile industry. And the Government
usually considers both the cotton and textile sectors while deciding on its polices.

Cotton yarn prices at different markets across the country show a high correlation of above 90% with
India's raw cotton prices.

Global trade is particularly important for cotton. In addition to around 30% of global cotton fibre
production being traded, it is also traded indirectly as yarn, fabric and clothing.

As cotton is used primarily in manufacturing products such as clothing and home furnishings, the
overall health of associated industries and the economic well-being of final consumers are important.

New developments in the textile industry, with regard to the adoption of new technology, fibres,
mechanisation, and so forth, impact cotton prices in the long run.

20000

110
100
90
80
70
60
50
40

(including CTCL)
(as of Q3 FY 2012-13)

18000
17000
16000
15000
13
/20

13

4/3

12

/20
2/3

20

12
20

12
/3/

12

MCX Continuous

10
/3/

12

/20
8/3

12

11

12

/20
6/3

/20
4/3

20
2/3
/

/20
12
/3

/20

11

14000
10
/3

MCX reaches
out to over
1,770 cities and
towns in India
through
3,46,000+
trading
terminals

Rs/Bale

19000

ICE Continuous

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

Cents/LB

Relationship between MCX Cotton Futures and ICE Cotton Futures

170 kg
355.62 kg of lint cotton
Approx. 48 Candy
217.7 Kg

CONTRACT SPECIFICATIONS OF COTTON #

Symbol

COTTON

Description

COTTONMMMYY

Trading Period

Mondays through Saturdays

Trading Session

Monday to Friday: 10.00 a.m. to 5.00 p.m.

Saturday: 10.00 a.m. to 2.00 p.m.

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

MCX has
strategic
alliances with
several
commodity
exchanges of
the world

Ex-Warehouse Rajkot (Within 100 km radius) excluding all taxes,

duties, levies, charges as applicable.

Daily Price Limits

3% + 1%

Initial Margin

Minimum 5% or based on SPAN, whichever is higher

Additional and/ or Special Margin

An additional margin (on both buy and sell side) and/or special
margin (on either buy or sell side) at such percentage, as may be
deemed fit, will be imposed by the Exchange/FMC, as and when is
necessary, in respect of all outstanding positions

Maximum Allowable Open Position

For individual clients: 50,000 bales

For a member collectively for all clients: 150,000 bales or 15% of the
market wide open position whichever is higher.

Delivery Unit

100 bales (170 quintals* or 48 candy approx.) *+/- 5%

Basic Delivery Center

Rajkot (Gujarat)

Additional Delivery Centers

Jalgaon/ Aurangabad (Maharashtra), Kadi (Gujarat), Abohar/Bhatinda

(Punjab), Sirsa (Haryana), Burhanpur (Madhya Pradesh),
Adilabad/Guntur (Andhra Pradesh)
The discounts with respect to transportation charges from each of the
additional delivery canters to the basic delivery center (Rajkot) will be
announced by the exchange before the launch of contract.

Quality Specifications Physical

Ginning Pattern: Roller Ginned Cotton. Saw Ginned Cotton will be

Inspection and HVI Mode accepted with discount
Basis Grade: Standardised grade as per HVI Middling 31-3,
accepted up to 41-3 with premium/discount
Staple length - 29 mm (+/- 2mm) with premium/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
(within 100 Km radius).

Salient features
Note: Please refer to the exchange website for detailed contract specifications and exchange circulars for the latest contract
specifications and delivery and settlement procedures.

110413

Customer Support: +91-22-6649 4040 | To get the latest futures prices on mobile: visit http://m.mcxindia.com or sms MCX <Commodity name> to 58888

Multi Commodity Exchange of India Limited

Exchange Square, Suren Road, Chakala, Andheri (East), Mumbai 400 093 | Tel. no.: +91-22-6731 8888 | Email: info@mcxindia.com | Website: www.mcxindia.com