India Increases Minimum Price of Cotton to Match Market Rates

Sept. 5 (Bloomberg) -- India, the world's second-biggest cotton producer, raised the price it guarantees farmers by as much as 48 percent to match an increase in market rates.

The government will pay 3,000 rupees ($68) for every bale of long staple fiber, up from 2,030 rupees a year ago, said Subhash Grover, managing director of state-owned Cotton Corp. of India Ltd., the nation's biggest buyer of the commodity.

Prices of medium staple cotton were raised 39 percent to 2,500 rupees a bale, he said. A bale of cotton in India weighs 170 kilograms (375 pounds).

Cotton prices in India gained more than 40 percent in the past year as farmers and traders held back supplies and exports surged, according to Cotton Association of India Ltd.

Production in the year from Oct. 1 may reach 32.5 million bales, Grover said. That's 1 million bales more than an August forecast by Cotton Corp.

Farmers planted the crop on 8.9 million hectares (22 million acres) as of Aug. 29, 2 percent less than a year ago, according to the farm ministry.

To contact the reporter on this story: Pratik Parija in New Delhi at pparija@bloomberg.net.