(Reuters) - Cotton spot prices in India, the world's second-largest producer, are likely to skid further this week after falling on Monday on higher supplies and softening global prices, which could cut export demand for the Indian fibre.
Farmers in the northern states of Punjab, Haryana and Rajasthan have already started harvesting cotton and are bringing it to spot markets, which is weighing on sentiment, traders said.
In irrigated areas of Punjab, Haryana and Rajasthan, farmers start sowing cotton in the second half of May, about a month earlier than the rest of the country, where planting starts only after the arrival of the monsoon, usually late June.
"Supplies in spot markets are rising, prices in overseas markets are low and the rupee is also getting stronger. All these factors are weighing on prices," said Arunbhai Dalal, a trader based in Ahmedabad in Gujarat.
Cotton prices in local markets have been sliding since the beginning of this month on increased rains in key growing areas, which could help the standing crop and allay fears of a steep fall in output.
Heavy rains in September compensated to some extent for lower precipitation in June and July, and may help farmers harvest 34 million bales of cotton in the year that begins on Oct. 1, marginally lower than the record 35.3 million bales in the previous year, according to a Reuters poll.
The government has forecast a harvest of 33.4 million bales.
In New York on Monday the key December cotton contract fell to its lowest level since Aug. 16 on waning world demand and an expected rise in global output.
At 0925 GMT, the contract was trading up 0.28 percent at 72.70 cents per lb.
On Monday, the most-traded Shankar-6 variety closed down 300 rupees to 34,000 Indian rupees per candy of 356 kg (around 81.7 cents per lb), data from the Cotton Association of India showed. Spot market prices are available in the evening.
Cotton futures started trading on the Multi Commodity Exchange (MCX) in late 2011, but volumes have been thin.
The key October cotton contract was up 2.08 percent to 16,220 rupees per bale (80.2 cents per lb), rising from a contract low of 15,760 rupees touched on Monday.
( 1 bale = 170 kg) ($1 = 53.51 Indian rupees)
