September 23, 2019 / 3:48 PM / 24 days ago

India's state-run cotton buyer could ramp up purchases to support prices

JALGAON, India (Reuters) - India’s state-run cotton buyer could purchase as much as 10 million bales from farmers in the 2019/20 season to support prices amid an expected sharp increase in production, the head of Cotton Corporation of India (CCI) said on Monday.

An employee unloads cotton from a truck at a cotton processing unit at Kadi town, Gujarat, April 5, 2018. REUTERS/Amit Dave/File Photo

That would be nearly 10 times CCI’s cotton purchases in the 2018/19 season, which ends on Sept. 30.

CCI buys cotton from farmers whenever prices fall below the minimum buying price set by the government.

India’s cotton production in the 2019/20 season, which starts on Oct. 1, is likely to jump as much as 20% from a year ago to 37.5 million bales, the highest in five years, due to a bigger cultivated area and a boost to yields from above-average monsoon rains.

Higher purchases by CCI could keep local prices firm and limit exports from the world’s biggest producer of the fibre, supporting global prices that have fallen 18% so far in 2019.

“We have made infrastructure ready for procurement. Buying may be around 10 million bales,” P. Alli Rani, chairman of CCI told Reuters on the sidelines of a conference.

This season, CCI purchases were relatively low as prices in the local market were trading above the minimum buying price for the most period.

Traders expect a drop in local prices in coming months due to higher cotton production and as India’s exports have become uncompetitive following a drop in global prices as the trade war between the United States and China intensified.

Cotton supplies in the next season could be delayed by a few weeks due to heavy rainfall in key growing areas in the last few weeks, which is set to delay harvesting, Rani said.

In mid-November supplies are expected to pick up and could pull cotton prices below the government-fixed support price of 5,550 rupees ($78.37) per 100 kg, she said.

(1 Indian bale = 170 kg)

($1 = 70.8140 Indian rupees)

Reporting by Rajendra Jadhav; Editing by Susan Fenton

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