Source: Reuters

August 27 2013

* Demand from China, Japan, Europe help yarn exports rise

* Monsoon rains heaviest in nearly two decades

* India's 2013/14 cotton output forecast to rise 4.5 pct

By Meenakshi Sharma

MUMBAI, Aug 27 (Reuters) - Heavy rains in India's cotton-cultivating areas will delay its harvest by at least 15 days, exacerbating shortages, pushing up local prices and potentially postponing export deals for the new season's crop, traders said on Tuesday.

Buoyed by robust demand from China, Japan and Europe, and a more-than-16-percent drop in the rupee, trade commitments for cotton yarn exports rose 48 percent in July from a year earlier, data from the Director General of Foreign Trade showed.

Any delay in sealing export deals for the new season crop may support benchmark New York cotton prices, which rose 1 percent on Monday, clawing back ground after they lost nearly 10 percent last week. Harvested cotton in India, the second-largest grower, typically starts arriving on local markets from October.

But higher-than-average rains in Gujarat and Maharashtra states in the west and Madhya Pradesh state in the centre have crimped harvesting. During the first half of the four-month monsoon, which started June 1, rains were at their heaviest in nearly two decades.

"Cotton supplies from the new crop are likely to get delayed by 15-20 days because of heavy rains. Supplies are already short and a delay would further add to the pain of millers," said Arun Kumar Dalal, a trader from Ahmedabad in Gujarat, the top producing state. Old crop supplies have trickled in at the end of the previous growing season but demand remains strong from both millers and yarn exporters. Any delay in fresh arrivals would further support domestic prices, traders said.

The most-traded Shankar-6 variety has risen more than 23 percent since June to 47,100 rupees ($730) per candy of 356 kg, data from the Cotton Association of India (CAI) showed.

"Prices can jump by 1,000-1,500 rupees per candy by end September or October in the local market on the crop delay," said Dalal, the trader in Ahmedabad. CAI, has forecast a 4.5 percent rise in output to 37.2 million bales of 170 kg each in the year beginning October 2013. Farmers have so far planted cotton on 11.13 million hectares, slightly lower than a year earlier, the farm ministry has said. ($1 = 64.4850 Indian rupees) (Source: Reuters)