Strong Demand Likely to Keep India Cotton Prices Firm

MUMBAI - Cotton prices in India, the second largest producer in the world by volume, is likely to remain firm over the next three months due to strong demand from domestic mills, industry executives on Friday.
The widely traded price of Shankar-6 variety of cotton has more than doubled in the last year to a record of more than 61,000 rupees (1,365 dollars) per 356 kg in the local market.
The demand for cotton in India shot up after flooding damaged crops in major producers in China, Pakistan and Australia. Local purchasing also has accelerated, increasing prices.
domestic factories still have to cover large quantities of cotton to meet their needs until the new crop comes in October, said Mohit Shah, director of Gill & Co. SA., a major exporter of cotton in India.
An important part of the production of cotton in India, estimated at 31.2 million bales in the crop year ending septiembre30, has come on the market and the arrivals of the day is likely to decline gradually in the coming weeks.
cotton arrivals in the markets of India amounted to 25.6 million bales between 1 and 20 March. Each bale weighs 170 kilograms.
Merchants say some populations and domestic mills are struggling to buy cotton due to limited transactions and flow of tight money, an industry executive, who declined to be identified, said.
"Fundamentally, there is no reason for prices to fall," said A. Ramani, assistant secretary of the Association of South India Cotton.
Gill & Co. 's Shah said that any fall in prices will find support reconstruction underlying stock or stock of the factories.
"Prices are bound to be strong beyond April. Do not be surprised if some saw record prices in May or June," said Ramani.
The government-run Cotton Advisory Council, said in late February that the consumption of local factories is expected to increase by 12% in 2010-11 over the previous year to 23.2 million bales.

(Source: http://online.wsj.com/article/SB10001424052748704517404576222200683849100.html)