Indian cotton seen range-bound on yarn demand

Last Updated: Mon, May 27, 2013 12:50 hrs

MUMBAI, May 27 (Reuters) - Cotton prices in India are expected to remain range-bound this week due to a pick-up in yarn demand, though sowing in some irrigated areas and sales from government reserves are seen capping the gains.

Sowing of cotton has begun in irrigated areas of Punjab and Haryana while in non-irrigated areas planting would commence by mid-June, traders said.

"So far cotton sowing is good in Punjab and Haryana but major operations would start with the onset of monsoon. At some places cotton may have competition from guar seed," said Manu Mangaldas Shah, a trader from Ahmedabad, Gujarat.

Timely arrival of the monsoon, which is forecast to be average in 2013, could also weigh on sentiment.

The June cotton futures contract ended 0.6 percent up at 18,370 rupees per bale of 170 kg each on the Multi Commodity Exchange.

Demand for yarn from local buyers and exporters has increased and is expected to stay firm in coming days, traders and analysts said.

A pick-up in sales from the Cotton Corp of India (CCI) is expected to keep the fibre under pressure.

"CCI has sold actively last week. Improvement in sales from government reserves is likely to restrict any sharp upside in prices," said Prerana Desai, vice-president of research at Kotak Commodities.

CCI had offered 38,100 bales to be sold through on e-auction on Monday, a notification on its website showed.

India has started selling cotton from government-controlled stocks as it tries to protect domestic textile mills from costly imports, but traders said sales have so far been limited because of high prices.

In New York, the most active July contract on the Intercontinental Exchange was down 0.31 percent at 81.53 cents per lb.

Forward sales of this year's U.S. cotton crop slowed to a trickle this month as growers either worried about a deepening drought or maintained hopes that prices would recover from their recent downtrend. (Reporting by Meenakshi Sharma; Editing by Sunil Nair)

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