February 1, 2012

India's cotton prices stabilise; eyes on Rupee

India's cotton prices are expected to stabilise for the second week as a result of low demand from exporters due to an appreciating Rupee.

Farmers in the western state of Maharashtra, the country's second largest producer, are hoping the government will step in to support prices after they almost halved since last March, while costs of seeds, fertilisers and fuel rose.

Cotton arrivals from the new crop fell 14.1% to 16.62 million bales of 170 kg each, the Cotton Corporation of India said on Tuesday.

"Strengthening of rupee, and lack of demand from China due to a holiday season, is likely to keep exporter away from buying, while low supplies could prevent prices from falling," said Dheeraj Bhai a trader based in Mumbai.

The partially convertible rupee has risen about 7.5% this month.

The state-run Cotton Advisory Board (CAB) trimmed its crop estimate for the cotton year 2011-12 ending in September by 1.1 million bales to 34.5 million bales and raised the shipment forecast to 8.4 million bales.

On Monday, the most traded Shankar-6 variety rose INR200 (US$4) to INR36,300 (US$732) per candy of 356 kg each, data from trade body Cotton Association of India showed.