July 25, 2012

India's cotton prices likely up continuously on weather woes

As insufficient rains in key growing regions adversely impacted sowing, India's cotton prices are likely to continue their upward journey this week, though a decline in global prices could weigh.

On Monday (July 23), the most-traded Shankar-six variety closed INR200 (US$3.55) lower at INR35,500 (US$629.5) per candy, data from the Cotton Association of India showed.

Cotton prices, which rose nearly INR1,500 (US$27) in the last two weeks, fell on Monday (July 23) a s traders were reluctant to buy at higher levels, traders said.

At 1020 GMT, the key July cotton contract on the Multi Commodity Exchange (MCX) was trading down 0.39% at INR17,950 (US$318) per bale of 170 kilogrammes.

"Lower rains in top growing Gujarat and other cotton producing states have adversely impacted sowing and even if it rains now, the area under cotton is likely to fall," said Dheerajbhai Khaitan, a trader based in Gujarat.

Cotton cultivation in India, the world's second-biggest producer, is likely to fall in 2012-13 from last year, as patchy rains in key growing areas and better returns from competing crops like soy could prompt farmers to reduce areas under the fibre cultivation.

The country has so far received 22% lower rainfall since the beginning of the monsoon season on June 1, weather department data showed. Most farmers in India plant cotton in June-July with the arrival of monsoon and begin harvesting after October-November. Besides this, higher demand from yarn makers is also pushing prices, said Khaitan.

India's cotton year runs from October-September. Cotton output in India in 2011-12 season ending on September rose to 34.7 million bales, according to an estimate by the Cotton Advisory Board.