India Offers Cotton Below NY Futures For First Time in 2011.

Indian cotton exporters are offering discounts to New York futures prices for the first time this year to secure sales for an extra 1 million bales allowed by the government as competition hots up, three exporters told Reuters.

The exporters are offering cotton at USD 1.37 to USD 1.42 per lb including cost and freight to neighbouring countries, compared with New York July contract's close of USD 1.6455 per lb on Thursday.

Six months ago, Indian exporters were charging premiums of up to 17 cents per lb over New York futures amid strong demand from leading buyers China and Pakistan, but now competition in supply is intensifying from Australia, Brazil and African countries.

"Market dynamics have changed. There are now many suppliers in the world market, so we have to quote prices considering their prices," said Chirag Patel, chief executive officer at Jaydeep Cotton Fibers Pvt. Ltd, one of India's top exporters.

Australia's 2010/11 cotton harvest is likely to be completed by the end of June and the world's third largest cotton exporter is expected to ship record quantities of the fibre in the coming year.

Brazilian cotton exports are set to double to a record 900,000 tonnes from the coming harvest which begins in June, after last year's price surge led producers to increase their plantings over soybeans and corn.

India, the world's second biggest producer and exporter of the natural fibre, earlier this month allowed additional exports of 1 million bales for the current cotton year ending in September, after exporters shipped 5.5 million bales earlier in the season.

Cotton prices in India have fallen by over a third since hitting a record high of Rs 61,700 (USD 1,371) per candy of 356 per kilogramme (kg) on March 30 on record local output and the restrictions on exports.

"Domestic demand is not very good. Textile mills have enough stocks and they are expecting a good crop in next season. No one is buying aggressively," said Dharmesh Lakhani, a trader and exporter based in western Gujarat state.

The south Asian country is likely to produce a record 31.2 million bales in 2010/11, the Cotton Advisory Board estimates.

Cotton acreage in India may rise by up to 15 percent in 2011/12 as the record high prices earlier in the current season may induce farmers to expand acreage, industry officials, traders and farmers have said.

Source : moneycontrol.com