Cotton production in India, the second-biggest grower, will be lower than earlier forecast after diseases cut yields in the states of Maharashtra and Andhra Pradesh, said the nationΆs textiles commissioner.

The harvest may reach 34.5 million bales of 170 kilograms (375 pounds) each in the year that began Oct. 1, against 35.6 million bales estimated on Nov. 15, Textiles Commissioner A.B. Joshi told reporters in Mumbai after a meeting of the Cotton Advisory Board. India produced 32.5 million bales in 2010-2011.

A smaller-than-expected crop may lower stockpiles in the country as exports increase and demand improves from domestic textile mills, boosting prices and raising costs for garment makers such as Arvind Ltd. (ARVND) and Gokaldas Exports Ltd. (GEXP) Cotton futures increased 8.2 percent in New York this year after plunging 37 percent in 2011, the most in seven years.

“New crop arrivals have been lower so far, which means production may be only marginally better than last year,” D.K. Nair, secretary-general of the Confederation of Indian Textiles Industry, said by phone. “Local prices will rise as ending stocks may come down because of higher exports.”

Output in Maharashtra may be 6.9 million bales, 19 percent below the 8.5 million bales estimated in November, while production in Andhra Pradesh may decline 13 percent to 4.8 million bales, Joshi said. Maharashtra and Andhra Pradesh are the second- and third-largest growers after Gujarat.

China Demand

Indian cotton prices, which climbed to a record 63,000 rupees ($1,260) per candy (356 kilograms) in February last year, have fallen to 36,500 rupees as of Jan. 20, according to the Cotton Association of India.

The export estimate was increased to 8.4 million bales from 8 million bales predicted in November, Joshi said. India exported 7 million bales last year. Around 88 percent of the 4.4 million bales shipped so far have been to China, he said.

“China is buying a lot of cotton for its buffer requirement,” according to Nair from the textile confederation.

Demand for cotton from textile mills may climb to 24 million bales from 23 million bales estimated earlier, Joshi said. Stockpiles will be 5.5 million bales by Sept. 30, he said. ThatΆs lower than the 7.8 million bales estimated in November, according to the textile confederation.

“Mill usage will rise as yarn prices have started looking up in the last one month, while cotton prices have been stable,” Joshi said.