September 11, 2013 / 12:17 PM / 4 years ago

Indian cotton seen weak on higher output hopes, poor demand

MUMBAI, Sept 11 (Reuters) - Cotton futures in India are likely to fall this week due to estimates of higher production, approaching supplies from the new season crop, weak demand from millers and exports at higher prices.

Harvested cotton in India, the world's second-largest grower, typically starts arriving in local markets from September end or October.

"Prices will fall as arrivals from the new crop would increase in the local markets. Supplies are going to be ample in the new season," said Arun Kumar Dalal, a trader from Ahmedabad, a key market in Gujarat.

Some marginal supplies from the new season crop have started coming into the market but would gather pace only in October.

Traders expect India's cotton output in the 2013/14 crop year to rise to around 36-37 million bales on hopes of improved yield.

The most-active October cotton contract ended 1.31 percent down at 21,130 rupees per bale on the Multi Commodity Exchange on Wednesday.

India's cotton exports are expected to drop by a fifth this year on account of a slump in purchases by top cotton consumer China and higher domestic prices, a Reuters survey of traders and exporters found.

As on Sept. 5, farmers planted cotton on 11.31 million hectares, down from 11.35 million hectares a year earlier, the farm ministry has said.

Millers have slowed buying on hopes of a fall in prices from current levels, traders said.

The most-traded domestic spot Shankar-6 variety fell by 300 rupees to 47,400 rupees per candy of 356 kg (94 cents per lb), data from the Cotton Association of India showed.

In New York, the December cotton contract on the Intercontinental Exchange was up 0.06 percent at 84.52 cents per lb at 1202 GMT, as China began stockpiling this week and on expectations that Thursday's monthly U.S. government forecast would show continued strong demand in the world's top consumer. ($1 = 63.9575 Indian rupees) (Reporting by Meenakshi Sharma; Editing by Prateek Chatterjee)

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