Jul 19 (Reuters) - India's cotton prices are likely to decline in the current week due to lower demand from yarn makers, higher stock availability and lower prices overseas, said dealers and analysts.
According to traders, the government's decision to allow exports of an additional 1 million bales of cotton in the 2010/11 season, which began in October, has failed to arrest the downtrend in cotton prices.
On Monday, the most traded Shankar-6 variety fell 1,000 rupees to end at 32,000 rupees per candy of 356 kg. It has declined over 48 percent from its record high of 61,700 rupees per candy hit on March 30.
India is world's second biggest grower and exporter of the fibre.
"Prices can go down further as exporters have sufficient stocks and yarn makers are still not buying, and recent rains in Gujarat have raised the hope for a good crop," said Bhavesh Patel, a trader based in Surat.
The government had, in June, allowed shipment of extra 1 million cotton bales of 170 kg each on demand from traders and farmers, following a 30 percent decline in domestic prices of the natural fiber since March.
Earlier, it had allowed shipment of 5.5 million bales of 170 kg each in the current cotton season.
The government had last week extended the last date for the export registration of the additional 1 million cotton bales to July 22 from July 15. [ID: nL3E7IF28D]
A downtrend in cotton prices overseas is also impacting sentiment, said a trader based in Mumbai.
The key December cotton contract on New York futures closed at $0.96 per lb on Monday, the lowest in nine months on debt woes in US and Europe. [ID:nN1E76H1B5}
Cotton acreage in India is likely to rise up to 15 percent in the 2011/12 season as farmers, lured by high prices in the current season, might plant the natural fibre in more areas.
The Cotton Advisory Board, a federal body, estimates the country may have produced a record 31.2 million bales in 2010/11, lower than the previous estimate of 32.9 million bales, but still 5.8 percent higher than the previous year.
