India, the world's third-largest cotton producer, is likely to step up imports over the next two months as domestic prices are seen rising with a seasonal drop in local supply, traders said on Wednesday.
It is likely to buy about 200,000 bales (of 170 kg each) in the remainder of the current year to September, taking total imports in the year to about 500,000 bales, they said.
"Domestic prices will rise over the next two months as stocks are falling and there is a shortage of good quality cotton in the market," said Saurabh R Chudgar, a cotton dealer based in the western city of Ahmedabad, a leading textiles trading centre.
India bought about 1.6 million bales of cotton in 2002/03 (October-September) but imports in the current year are expected to be much lower due to a surge in domestic output to about 16.5 million bales from 13.6 million bales.
Farmers are selling about 40,000 bales of cotton a day, down from about 100,000 bales during the peak marketing season of December and January, they said.
Limited stocks of cotton remained from the crop that was sown in June and July of 2003 and harvested from November, traders said. Stocks with ginners and millers were also depleting.
"Cotton arrivals in the market will gradually decline and may continue until May," said Sushil Shah, a cotton dealer based in Bombay, the country's financial capital.
Traders said prices would rise in the coming months as many mills would be in the market to buy cotton before the rainy season starts in June. Many mills would rely on imports for good quality cotton, domestically in short supply, they said.
"Imports are not viable at the current prices but millers are waiting for the right opportunity to strike import deals," said Manoj Gala, a cotton dealer.
Long-staple cotton variety from the domestic crop was quoted at about 25,500 rupees ($570) a candy of 356 kg, lower than 28,000 rupees for the similar grade of imported cotton, traders said, adding the gap a month ago was 500 to 1,000 rupees a candy.