(Reuters) - Cotton prices in India are likely to rise this week on higher buying by local yarn makers and subdued rains in key growing areas, which could impact planting and trim output in the next season that begins on Oct. 1.

At 0925 GMT, the August cotton contract on the Multi Commodity Exchange (MCX) was trading down 0.7 percent at 18,390 rupees per bale of 170 kg.

"Cotton prices are rising across India on concerns that the fibre output in the next season could be lower, which prompted yarn makers to buy aggressively from the spot market," said Arunbhai Dallas, a trader based in western Gujarat state.

On Monday, the most-traded Shankar-6 variety closed 1,200 rupees higher at 36,900 rupees per candy, data from the Cotton Association of India showed.

Cotton cultivation in India, the world's second-biggest producer, is likely to fall in 2012/13 from last year, as patchy rains in key growing areas and better returns from competing crops like soybeans could prompt farmers to reduce areas under the fibre cultivation.

The country has so far received 22 percent lower rainfall since the beginning of the monsoon season on June 1, weather department data showed.

Most farmers in India plant cotton in June-July with the arrival of monsoon rains and begin harvesting after October-November.

India's cotton year runs from October to September.

Cotton output in India in 2011/12 season ending on September rose to 34.7 million bales, according to an estimate by the Cotton Advisory Board.