India cotton seen down on export ban.

MUMBAI, April 26 (Reuters) - India's cotton prices may fall sharply after India stopped exports of the commodity last week, analysts and traders said.

India has stopped cotton exports to control soaring local prices, tightening global supplies and raising prospects of a further rise in New York futures that rose to a two-year high last month.

Spot prices of most popular variety of cotton have come down by 3 percent since the ban imposed last Tuesday. The prices had risen upto 54 percent compared with the same period last year.

The Indian government stopped registering new contracts for exports from April 19 after a panel of ministers discussed steps to arrest the sharp rise in local cotton prices, an official statement said.

This month, the chairman of the government's Cotton Advisory Board said India's cotton exports in the year to September 2010 were likely to more than double to 8 million bales on strong demand from China and Bangladesh.

Out of 8.5 million bales of cotton registered with the authorities for exports, 6.01 million bales had already been shipped out, a senior official in the textile ministry told Reuters last week.

"Global prices will rise ...but domestically prices may come down," said Vandana Bharti, head of research at SMC Comrade.

However, the textile industry, which is the primary user of the commodity, believes prices may not come down significantly as already large amount have been exported.

"It's too late ...the cost of production has been very high for large part of the year...now there is not much stock left anyway," said an official with a textile industry association.

Source : REUTERS