Export demand to keep India cotton prices up

Ahmedabad, Dec 29 | Updated: Dec 30 2006, 05:30am hrs
Demand for Indian cotton is seen increasing in 2007 because of its quality and pricing. Also, competitors US and Pakistan are expected to report a fall in the output.

However, demand may fall if domestic prices fluctuate widely. China will be the main importer in 2007.

There is good hope for Indian cotton exports to swell due to growth in Chinese textile sector, which needs regular supply of cotton, Biren Vakil, of Paradigm Commodity Advisors, said.

Last week, state-owned Cotton Advisory Board estimated that exports during 2006-07 (Oct-Sep) would rise to 5 m bales (1 bale=170 kg) from 4.7 m bales year ago.

According to textile commissioner JN Singh, China is likely to be the main importer.

Domestic prices are likely to be stable-to-low during Oct-Mar, as the market is expecting a bumper crop.

CAB has estimated Indias cotton output for 2006-07 at 27 m bales compared with 24.4 m bales in 2005-06.

Huge arrivals till March-end are expected to keep prices stable. Also, domestic textile mills, committed to their inventories, are likely to shy away from buying in the first half.

However, prices may rise in the second half due to demand from both domestic and overseas textile industry.

Drought in Australia and weather vagaries in Asia and US are likely to impact crop and thereby the supply position.

CRISIL MarketWire