Cotton (Kapas) - Cost of Farming?

man4urheart

Well-known member
#1
Does anybody have a idea how much it costs to produce kapas 1 KG?

Govt of India has set MSP (minimum support price) of 3000 Rs a Quintal or 30 Rs per Kg?

NCDEX Price of futures is 20 KG = 710 Rs or 1 Kg = 35 Rs approx.?



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Seeing the chart even lower prices are ahead in coming months! I guess farmers should skip this crop maybe!

Looks like they sowed the crop in beginning of this year when we made a top with expectations of even higher prices and it actually crashed!

I read this

Farmer drinks poison in front of CM - The Times of India

I want to know what is the issue? Would a hedge in future for this farmer could have been solution to problem!
 
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Alchemist

Administrator
Staff member
#2
I want to know what is the issue? Would a hedge in future for this farmer could have been solution to problem!
The issue is that there are too many people involved in agriculture, the sizes of their farms are too small and their methods inefficient and obsolete.

If India wants its farmers to live a decent life, it has two options:

- Move majority of the farmers from agriculture to manufacturing and services.

or

- Allow crop prices in India to rise by 200% or 300% and also fully allow exports of agricultural products.

Coming back to your question on cost of production of cotton, there is no single figure that I can give you.

There are too many variables that determine the cost of production of a crop.

The cost of production for the least efficient farms can be 300% of the cost of production for the most efficient farms.

Currently, the expenditure on per acre basis comes to around Rs 10,980 excluding harvesting cost that is pegged at Rs 7 a kg. In 1995, the figure stood at Rs 2,500 per acre. The cotton yield this season has been pegged at two to five quintals an acre. So a farmer with a couple of quintals in an acre suffers a loss of Rs 5,780 at MSP and even at the market rate of Rs 4400.
The output on irrigated lands will be at least six quintals an acre. Some even reap upto 15 quintals. However, only 15% of cotton growing land in Vidarbha is irrigated, said the source.
Cotton growers in a bind: Costs up, yields & price low - Times Of India
 

man4urheart

Well-known member
#3
If I understand correctly, it is game of yields!

An Acre producing 2 quintals

2 Quintals or 200 Kg cost =10,980 or rounding to 11000 Rs
1 Kg = 11000/200 =55RS
Adding Harvesting cost =55+7 = 65 RS

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An Acre producing 5 quintals

5 Quintals or 500Kg cost =10,980 or rounding to 11000 Rs
1 Kg = 11000/500 =25RS
Adding Harvesting cost =25+7 = 31 RS

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The lucky farmer with irrigated lands, An Acre producing 15 quintals

15 Quintals or 1500Kg cost =10,980 or rounding to 11000 Rs
1 Kg = 11000/1500 =7 RS
Adding Harvesting cost =7+7 = 14 RS

Well if the farmer can lock the price at Jan 2011 price by shorting at that price or buying a Forward contract or Put option, which was 1200 for 20 Kgs on NCDEX, he would have locked 1kg = 60RS! (1200/20, NCDEX Price of futures for is 20 KG). Anybody having Yield more than 3 Dollars is in profit!

Instead of doing suicide or crying at doors of politicians, isn't this a good solution?
 

Alchemist

Administrator
Staff member
#4
Instead of doing suicide or crying at doors of politicians, isn't this a good solution?
15 Quintal of yield is very rare.

India's average yield may be 5 or 6 quintal per acre. I checked a few sources and I got different figures from each.

The volumes in commodity exchanges are almost nil (compared to the actual production in India).

It is not possible to shift the entire cotton market to futures.

Most of the cotton trading in India is still done in spot markets.
 
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