Cotton prices may fall below the government mandated minimum support price (MSP) once new arrivals reached the markets October onwards, say traders as major producers Brazil and the US are heading towards a bumper crop while India’s exports have cooled.

To ensure that farmers get the MSP, state governments may undertake procurement operations, especially in Maharashtra and Haryana which are going to assembly elections later this year, they said.

Indian cotton prices have declined more than 3% in July due to cheap imports and sluggish yarn exports to China. The spot price of 29 mm cotton in Gujarat fell from Rs. 45,000 per candy on June 29 to Rs. 43,500 on Tuesday. One candy is 356 kilograms.

“Cotton prices have slightly declined due to sluggish cotton demand. Decline in yarn exports has reduced demand for cotton,” said BS Rajpal, the managing director of Manjeet Cotton, a cotton ginner. Along with slow yarn exports, a rise in cotton imports too weighed on cotton prices. “On one hand, cotton consumption declined dramatically, while at the same time, cotton imports are expected to touch 2.7 million bales (170 kg each), and the contracts for imports are still being signed,” said G Radhakrishnan, the president of the Coimbatore Cotton Association.