April 4, 2012

India's cotton prices may rise again

For the second straight week, India's cotton prices may increase on buying by government agencies and on a revival in demand from textile makers, which could offset the impact of a ban on fresh cotton exports.

"Prices fell initially following the ban on cotton exports, but now are rising on increased buying by the government agencies and by textile makers," said Ghanshyam Ladha, a trader based in Mumbai.

India, the world's second-largest producer and exporter of the fibre, has lifted a ban on cotton shipments imposed on March 5, but stopped registering fresh export orders.

State-run Cotton Corporation of India (CCI) has started buying from spot markets in Gujarat and Maharashtra states, the top two growers, pushing prices higher, traders said.

On Monday (Apr 2), the prices of the most traded Shankar-6 variety rose INR400 (US$7.87) to INR35,000 (US$689) per candy of 356 kg each.

Cotton prices are likely to go up by as much as INR500 (US$9.8) this week and by the end of April, they can touch INR40,000 (US$787) per candy, Ladha said.

Cotton arrivals in the domestic spot markets from October 1 to April 1 fell 8.7% to 26 million bales of 170 kg each versus 28.5 million bales a year earlier, CCI said on Monday.

India, the world's second-largest cotton producer after China, is expected to harvest a record 34 million bales, for the second straight year in 2011/12 ending in September.

A meeting of a panel of Indian ministers to discuss the issue of cotton exports has been postponed, government and trade sources said on Tuesday without elaborating.