Cotton arrival up 25 pct; prices seen soft

By Abhishek Shanker

MUMBAI (Reuters) - Cotton arrivals in India this season has risen by about 25 percent compared to last year and is likely to accelerate in key growing states, a senior government official said.

However, demand is not keeping pace and fell in December, bringing the prices down. Prices may fall further as exporters have stopped purchases, while most local mills are avoiding bulk buying, traders and officials said.

Total arrivals by December 12 in cotton year (Oct-Sept) have crossed 10 million bales, compared to a little over 8 million bales in the same period last year, an official at the Textile Commissioner's office, part of textile ministry, said.

India is likely to harvest a record crop of about 31 million bales in 2007/08 as against 28 million bales last year.

Despite good arrivals the demand from exporters, mainly to China, kept the prices strong in November as they had to meet Chinese import quota deadline of December 31.

"The demand is now over," a senior official in state-run Cotton Corp of India (CCI) said.

China, as part of its World Trade Organisation commitment, issues quotas for imports of low-tariff wheat, corn, rice and cotton each year.

Prices of Shankar-6 cotton have declined 2.5 percent to 19,400 rupees ($492.4) per candy (360 kg) in Surendranagar, a major trading hub in Gujarat, in December, traders said. They had touched 20,000 rupees per candy in November.