Increased domestic demand for yarn and a shortfall in global cotton production are expected keep cotton prices up, say industry sources.

Although domestic cotton production in 2007-08 is expected to be good, global productions are predicted to fall.

According to Textile Commissioner J. N. Singh market can expect only "marginal fall in prices" since cotton production in the US has reportedly decreased by 20 percent and the domestic demand of yarn has increased by 20 percent.

India's  production is expected to be around 300 lakh bales of cotton in 2007-08. According to Cotton Advisory Board this shows an increase compared to 280 lakh bales production in 2006-07.

In contrast, production in the US has decreased. In 2006-07 the US produced 21.6 million bales but the anticipated US crop size is only 17.3 million bales for 2007-08.

The March 2008 contract for NCDEX Kapas cotton closed on Monday up at Rs 430.20 per 20 kg against the previous close of Rs 424.8. But NCDEX spot prices of 28.5 mm variety have gone down from Rs 20,600 in August to Rs 20,560 levels in start of September.

As cotton year ends in September there would not be much buying now keeping the price subdued.

Fresh cotton arrivals would start from mid of October in India, though some arrivals have started from north. Cotton arrival starts from north followed by central and south regions.