With the United States expecting a fall in cotton sowings, traders said that India would see increased sales of cotton to China and Southeast Asian nations in the year ending September 2008. And this would help Indian exporters sell their expected record output in the new season at prices about 10% higher than last year.
Indian cotton will benefit from high prices, said Avinash Raheja, an analyst with Commtrendz Research.
Cotton hit highs near $1.20 per lb in the mid-1990s and some analysts said that prices could touch $1 lb in this bull run as market players expect it to be the next commodity to catch fire.
On Tuesday, the open-outcry December cotton contract in New York slipped 0.15 cent to settle at 66.08 cent per lb, trading between 65.15 and 66.43 cent.
First we had a rally in corn, now its in soybeans and wheat, and possibly cotton would become the next hot commodity, Raheja said. Analysts said that cotton would also find support as prices of polyester were high because of surging crude oil prices.
Cotton in domestic markets is being quoted at Rs 21,000 per candy, or 356 kg, up 7% from the same time last year, traders said.
In the new crop season starting in October, India's cotton output is forecast to hit a record 31 million bales, up almost 11% from 28 million bales in the current season, said Kishorilal Jhunjhunwala, president of the East India Cotton Association.