MUMBAI | Tue Dec 7, 2010 12:41pm IST
MUMBAI Dec 7 (Reuters) - Indian cotton prices may rise this week as exporters are seen ramping up purchases to ship maximum fibre ot 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 Nov. 1, but it has to be shipped before Dec. 15.
"Exporters will remain active in the spot market to fulfill their export obligations. They are struggling to buy required amount 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 Oct. 1, which could tighten the global supply situation.
Domestic cotton arrivals at Indian spot markets since Oct. 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 Suresh Lotiya, managing director, Shree Govardhan Cot-Gin Pvt Ltd.
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 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.
At 12:38 p.m., the benchmark March U.S. cotton futures contract CTH1 was up 1.08 percent at $1.3184 per lb.
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. (Reporting by Rajendra Jadhav & Darshan Mankad in AHEMDABAD; Editing by Harish Nambiar)
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