June 27, 2012

India's cotton prices seen rising on high demand

As the harvesting season ended, India's cotton prices may rise this week on greater buying by local textile and yarn makers, and on lower supplies in the spot market.

"Mills are buying in good quantity and arrivals have fallen. So prices are likely to rise this week," said Arunbhai Dalal, a trader based in western state of Gujarat, the largest grower of the commodity in the country.

Lack of rains in key growing area, which could adversely impact sowing, is also supporting the prices, Dalal said.

India received 24% lesser rains in the on-going rainy season, which began on June 1, weather department data showed. India's crucial monsoon rains are still expected to be average in 2012, the weather office said on Friday (June 22), helping to allay concerns over farm output triggered by sparse rainfall in the last few weeks.

Traders expect crop in the next season, which begins on October 1, to be lower and this could push up prices by up to INR1,000 (US$17.5) per candy of 356 kilogrammes each, Dalal said.

The area under cotton cultivation in India could fall up to 10% in the 2012-13 season beginning October as lower returns in 2011 may prompt farmers to switch to other crops. On Monday (June 25), prices of the most-traded Shankar-six were unchanged at INR33,800 (US$592) per candy of 356 kilogrammes, data from the Cotton Association of India showed.