MUMBAI, Oct 7 (Reuters) - Cotton futures in India, the world's second-largest grower, are expected to fall this week on hopes of higher output as rains lead to better yields and due to approaching supplies from the new season harvest amid sluggish exports.
The government estimated cotton output in 2013/14 at a record high 35.3 million bales as against 34 million bales a year ago.
Traders' associations and spot traders have forecast cotton output in the range of 37 million to 38 million bales in 2013/14.
"Cotton production is expected to be higher than in the previous year. Marginal supplies have started coming in at a few places and would gain pace by mid-October," said Manu Mangaldas Shah, a trader from Ahmedabad, a key market in Gujarat.
A delay in the fresh supplies due to rains could restrict losses in the near term but the trend looks weak on higher production. Fresh supplies, which start rolling in by October, have been delayed by 10-15 days this season, spot traders said.
Demand is not as-expected from the millers and exporters as every one is waiting for the new harvest, the traders added.
India has withdrawn incentives for exports of cotton and yarn, a value-added product used by textile mills, an official order said, a move that could cut exporters' margins in the world's second-biggest exporter of the fibre.
Traders expect cotton prices to start softening once arrivals from the new crop gain pace.
The November cotton contract was down 1.57 percent at 20,110 rupees per bale of 170 kg each on the MCX at 0731 GMT.
"The November contract looks weak and may fall to 19,800 rupees in the short-term," said Chowda Reddy, a senior analyst with Inditrade Derivatives and Commodities.
In New York, the December cotton contract on the Intercontinental Exchange was down 1.73 percent at 85.67 cents per lb as uncertainty over a U.S. government shutdown held down prices, even as a tropical storm headed for the cotton belt. (Reporting by Meenakshi Sharma; Editing by Anupama Dwivedi)