Cotton to Decline as Bigger U.S., India Crops Increase Supply, Group Says.

Cotton prices may decline as India prepares to resume exports from October and the U.S., the top shipper, harvests the biggest crop in three years, an Indian traders’ group said.

“The bumper U.S. crop will help build up global inventory in the next two to three months, and with India set to harvest a record crop and exports resuming, prices will soften,” Dhiren Sheth, president of the Cotton Association of India, said in a phone interview today. “It’s difficult to speculate the extent to which they’ll decline.”

India, the second-biggest grower and exporter, may harvest a record crop next season and pressure prices that have risen 41 percent in the past year as textile mills in Asia rebuild stockpiles. Cotton fell the most in almost a month yesterday in New York as rain eased dry conditions in West Texas, the most- productive region in the U.S.

Cotton for December delivery shed 0.7 percent to close at 83.27 cents a pound yesterday on ICE Futures U.S., the biggest drop since July 20.

India will allow exports from Oct. 1, the commerce ministry said April 17. Shipments were halted in April to cool domestic prices and bolster supplies. A month later, the government introduced a new licensing system.

“Marketing of Indian cotton will be easier now that there is clarity on exports,” Sheth said, whose Galiakotwala group is among the nation’s oldest cotton trader. “Buyers were putting a lot of riders and conditions for buying Indian cotton because of the ambiguity. Now there won’t be an issue.”

‘Lack of Supply’

Domestic prices will shoot up next season, raising costs for small- and medium-sized textile shippers, J. Thulasidharan, chairman of the Southern India Mills’ Association, said in a statement on the group’s website yesterday. Resuming exports may mean “a lack of cotton supply for the next two or three months,” he said.

Indian production may surge as much as 19 percent to a record 33 million to 35 million bales of 170 kilograms each in the year starting Oct. 1, from 29.5 million bales this season, Sanjay Lalbhai, managing director of Arvind Ltd., the biggest denim maker said last week. Output in the U.S., the top exporter, will jump 52 percent to 18.5 million bales, the biggest crop since the season ended July 2008, according to the U.S. Department of Agriculture.

Indian shipments will be 8.3 million bales in the year to Sept. 30, more than the 8 million estimated in April, the Cotton Advisory Board said on July 30. China will remain the top buyer of the nation’s cotton in the 2010-2011 season, Sheth said.

The textiles ministry may resume export registration from Sept. 1, he said.

The Cotton Association is group of 400 growers, ginners, traders and exporters, according to its website.

Source : bloomberg.com