January 22, 2013 / 1:27 PM / 5 years ago

OUTLOOK-India cotton seen edging down on higher supplies

MUMBAI, Jan 22 (Reuters) - Cotton spot prices in India, the world’s second-largest producer of the fibre, are likely to fall this week on surging supplies in spot markets amid lacklustre demand from textile makers, though buying by exporters could limit the downtrend.

Total daily cotton supplies in spot markets across the country have risen to 240,000-250,000 bales of 170 kg each per day from less than 200,000 bales per day in beginning of this month, traders said.

“Cotton supplies in spot markets are rising and are putting pressure on spot prices. Buying by government agencies steadied prices for some time but it is unlikely to hold further and they (prices) could fall again,” said Ritesh Agrawal, a trader based in Kolkata, West Bengal.

State-run Cotton Corporation of India (CCI) has already bought around 1.3 million bales in the current marketing year that started on Oct. 1, 2012, and could buy another 7 million bales to support prices in the local market, traders said.

Raw cotton prices in spot markets could fall by around 50-100 rupees per 100 kg this week, traders said.

However, buying by yarn makers on strong demand from China, amid a revival of cotton demand from neighbouring Bangladesh and Pakistan, could support prices.

Higher yarn imports by China have boosted cotton consumption in Southeast Asian countries as they ramp up production, traders said, adding that India, with surplus cotton availability, is likely to benefit more.

In New York, the key March contract on the Intercontinental Exchange was up 0.45 percent at 78.95 cents per lb at 1318 GMT after hitting a more than eight-month high at 78.99 cents per lb earlier in day.

The most-traded domestic spot Shankar-6 variety closed down 1,000 rupees at 33,100 rupees per candy of 356 kg each (around 76 cents per lb), data from the Cotton Association of India showed.

The January cotton futures contract on the Multi Commodity Exchange (MCX) closed up 0.12 percent at 16,270 rupees per bale. (Reporting by Deepak Sharma; Editing by Jijo Jacob)

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