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Cotton prices set to stabilise

Cotton prices could stabilise this year, after India - the world’s second-biggest exporter of raw cotton after China - looks set for a healthy harvest this year.

During July, the wettest month in India’s monsoon season, farmers planted about 9.5 million hectares of cotton, up from 8 million last year, according to reports. The bumper crop follows last year’s drought like conditions and a resultant drop in production.

Cotton farmers have planted bigger crops to cash in on higher prices as concerns over a global shortage and the withholding of exports by the country led to a hike in prices.

World cotton production is forecast to increase by 11% to 113.9m bales in 2010-11, according to figures from the US Department of Agriculture. It predicted however, that world consumption could rise to 119.1 million bales next season, up from an estimated 115.9 million.

India has also repealed its ban on raw cotton exports implemented in April in a bid to temper domestic prices which had risen by more than 25% since October. The ban has been partly lifted and from October 1 will be removed altogether.

Indian clothing manufacturers have reacted with concern about the removal of the ban and are calling for the Indian government to support its domestic textiles industry. As prices rise and cotton stocks fall, Indian manufacturers’ margins could fall.

Textile manufacturers in Pakistan and Bangladesh will also benefit from the relaxing of the controls and as recovery continues in the US and Europe, brands and retailers are increasing their orders from textile companies in Asian markets.

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