Wed Dec 22, 2010 1:42pm IST
* Prices seen rising further on strong export demand
* Govt seen allowing exports from early Jan-exporters
* Arrivals rise on dry weather, quality produce still scarce
By Rajendra Jadhav
MUMBAI, Dec 22 (Reuters) - Cotton prices in India jumped on Wednesday as exporters bought aggressively after the government said it will still allow exports of 2.5 million bales despite expiry of a Dec. 15 deadline, three exporters told Reuters.
Trade Minister Anand Sharma said on Tuesday that India -- the world's second-biggest producer of cotton -- would allow exports in 2010/11 of the 2.5 million bales that exporters have failed to ship so far.
India, which is also the world's second-biggest exporter of cotton, had given permission for exports of 5.5 million bales in the 2010/11 cotton year that began on Oct.1, but had asked exporters to ship the entire quantity from Nov. 1 to Dec. 15.
Exporters managed to ship only about 3 million bales by the deadline as unseasonal rains in October and November delayed arrivals of bales at domestic markets.
"Traders were very active. They were expecting the government will allow exports from first or second week of January," said Chirag Patel, chief executive officer at Jaydeep Cotton Fibers Pvt. Ltd, one of the country's leading exporters.
In India, the prices of the most common Shankar-6 variety rose by 900 rupees to 43,000 rupees ($952.8) per candy of 356 kg each on Wednesday afternoon.
"Indian cotton is much cheaper than Chinese or U.S. cotton. Exporters are expecting buyers in China will pay higher prices to secure supplies," said Dharmesh Lakhani, a trader and exporter at Rajkot in the western state of Gujarat.
Overseas demand for Indian cotton has increased after bad weather hit crops in China and Pakistan, both leading consumers.
U.S. cotton futures fell more than 3 percent on Wednesday as the market took a breather after climbing to an all-time high in the last session on speculative buying and tight supplies, while China's cotton market lost more that 2 percent.
"Overall cotton arrivals have picked up, but still supply of quality fibre is not sufficient," said Paresh Valia, an exporter based in Mahuva, in Bhavnagar district of Gujarat.
Domestic cotton arrivals -- bales which are sold domestically at Indian spot markets -- have risen 1.9 percent so far in the 2010/11 season over a year ago on higher output and accelerated harvesting after the weather turned dry, the state-run Cotton Corp of India said on Dec. 20.
India is likely to produce more than 32.5 million bales of cotton in 2010/11, topping last year's 29.5 million bales, industry and government officials have said.
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