MUMBAI: Indian cotton prices may rise this week as exporters are seen ramping up purchases to ship maximum fibre to beat a mid-December government deadline, dealers said. India, the world’s second biggest producer and exporter of the fibre, had allowed exports of 5.5 million bales from November 1, but it has to be shipped before December 15.
“Exporters will remain active in the spot market to fulfill their export obligations.
They are struggling to buy the required quantity of cotton,” said an exporter based in Rajkot, Gujarat, who declined to be named.
Indian cotton exporters are likely to ship less than half the 5.5 million bales allowed in the 2010/11 season starting October 1, which could tighten the global supply situation.
Domestic cotton arrivals at Indian spot markets since October 1 declined 2.5 percent on year to 7.02 million bales, but are likely to pick up this week as rainfall has stopped over growing areas, a senior government official said on Monday.
Western Indian states of Gujarat and Maharashtra, the two top producers, saw unseasonal rains last month, hurting arrivals.
“Due to lower arrivals in the last fortnight, domestic demand is also strong.
If the exporters are given extra time to fulfill their contracts, the prices would rise further,” said, Shree Govardhan Cot-Gin Managing Director Suresh Lotiya.
In India, the most common Shankar-6 variety was trading at 42,800 rupees per candy (of 356 kg each) on Monday, data with the Cotton Association of India showed. The price hit a record high of 46,200 rupees last month. Gains are likely to be capped by an expected rise in arrivals in the next fortnight as weather is dry over key growing areas, dealers said. The weather department on Tuesday said dry weather is likely over Maharashtra and Gujarat for the next four days. The benchmark March US cotton futures contract was up 1.08 percent at $1.3184 per pound.
Overseas demand for Indian cotton has increased after bad weather hit crops in China and Pakistan, both leading consumers. India is likely to produce over 33 million bales in 2010/11, sharply higher than last year’s 29.5 million bales, industry officials said.
