India May Boost Cotton Exports as Output Increases to Record, Group Says

India, the second-biggest cotton producer and exporter, may boost its limit on shipments to foreign buyers as domestic output jumps 27 percent to the highest ever, an association of growers and traders said.

“Everything points to the government raising the export quota when they assess the crop situation in December,” Nayan Mirani, a vice president of Cotton Association of India, said today in a telephone interview from Mumbai.

Production in the year that began last month may reach a record 37.5 million bales, above the association’s September estimate of 34.5 million and last year’s output of 29.5 million, he said. Demand from domestic textile mills may total 26.6 million bales, according to the group.

Increased exports from India may further erode gains in cotton prices, which surged this year after adverse weather damaged crops in China, Pakistan and the U.S. Cotton futures in New York have plunged 26 percent since touching a record $1.5195 a pound on Nov. 10.

“With expectations of higher output, one could expect the government to announce an increase in the export quota,” said Mike Stevens, an independent trader in Mandeville, Louisiana.

Export Limits

India on Sept. 4 said it would limit cotton exports to 5.5 million bales in the year beginning Oct. 1 in a bid to meet domestic demand. The textiles ministry halted registration of new export contracts on Oct. 11 when applications reached the specified limit. Louis Dreyfus Commodities, the top cotton trader, and Cargill Inc. are among the companies that won permits.

The 5.5 million-bale limit may be reviewed in December, Farm Minister Sharad Pawar said Oct. 20.

The government is planning to wait until next month for the review because by then the harvest and ginning will be well under way, Mirani said. He had earlier expected an assessment to be made this month.

The Cotton Association of India represents about 400 growers, ginners and traders.

Olam International Ltd. said shipments from India may not will the December quota set by the government because some exporters failed to secure supplies amid lower arrivals and record prices.

Exports may be 2 million bales, less than half the permitted quota to be shipped by Dec. 15, said Unupom Kausik, the head of the cotton business at Olam Agro India Ltd., a unit of one of the world’s three largest suppliers.

Futures for March delivery fell by the 6-cent exchange limit, or 5.1 percent, to settle at $1.1179 a pound at 2:44 p.m. on ICE Futures U.S. in New York.

An Indian bale weighs 170 kilograms (375 pounds).

(Source: http://www.bloomberg.com/news/2010-11-23/india-may-boost-limit-on-exports-as-crop-surges-27-to-record-group-says.html)