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India Cotton price may stabilise due to strong $

Written By Views maker on January 27, 2010 | 1/27/2010

The cotton market has seen exporters slowing their purchases as international prices have fallen more than Indian prices.A total of 600,000-800,000 bales have been registered for exports in January. "Of the 4.8 million bales registered by exporters so far this season, 4.2-4.3 million were registered between October and December. Traders estimate that just 2.2 million bales have been shipped to date. Industry observers say the reason is the higher cost of domestic cotton. Cotton futures in the US had touched 77-78 cents per pound before plummeting recently.Domestically, prices of the Shankar-6 variety have dropped from Rs 27,000 per candy to 26,500 per candy, roughly 75 cents per pound.Out of 15.5 million bales that had arrived, nine million were procured by domestic textile mills, 2.15 million bales were shipped abroad and 438,000 bales were purchased by Cotton Corporation of India (CCI). The remaining 3.5 million bales are unsold.

A few months ago, domestic textile mills were on a buying spree in the wake of a substantial rise in cotton yarn prices and good domestic demand from the textile industry. Cotton consumption of domestic mills is estimated to rise to 25.5-26 million bales this cotton year (October-September) as against 24 million bales last season.CCI, the nodal government agency for cotton procurement, has purchased barely 5 per cent of what it had procured last year.It had procured a record 8.94 million bales in 2008-09 at the minimum support price. Farmers are already getting more than the MSP and so they are selling cotton in the open market."CCI has about 50 per cent of the stock left from last year's procurement,".Despite the fall, experts say prices will largely remain firm this cotton year, mostly due to improved demand from China.The shrinking cotton output in major growing countries, except India, is likely to push world cotton production down 4.4 per cent to 102.72 million bales in 2009-10. "We expect lower end-season stocks this year, which will further fuel prices," said a cotton expert.