NY cotton rises, ends 3 days of losses on India drought fears


* Cotton recovers slightly after approaching one-month low

* India warns of possible drought

* Brokers point to global surplus

NEW YORK, July 26 (Reuters) – Cotton futures closed higher on Thursday, snapping three days of losses after approaching one-month lows a day earlier as India’s government warned of the possibility of a drought in one of the world’s largest fiber producers.

The benchmark December cotton contract on ICE Futures U.S. rose 1.88 cents or 2.7 percent to settle at 71.39 cents per lb, trading between 69.51 cents and 72.08 cents. Wednesday’s settlement was the lowest in almost a month, Thomson Reuters data showed.

India’s authorities warned for the first time on Thursday that a drought is possible and announced plans for ministers to meet as early as next week to discuss the lack of monsoon rains, which are key for major consumer and producer food crops.

It will be the first time the Empowered Group of Ministers (EGoM) on drought has met since 2009, which saw the driest monsoon in nearly four decades in Asia’s third-largest economy, where more than half of arable land is rain-fed.

“The drought in India is taking the forefront of the news and the ECB’s pledge of support for the euro has added to the gains,” said a U.S. cotton broker.

The news reinforced speculation in the cotton market that the country may restrict exports, although Food Minister K.V. Thomas said there are no such plans in place. The government will review the situation in mid-August.

While a ban on exports would likely give prices a fillip, it is unlikely to have much impact on supplies given the big global surplus washing around the market, brokers said.

“There is plenty of supply so this could be a short-lived event,” said the broker.

The recovery also bucked a weaker trend across grains, which slipped off their record highs as rains hit the Midwest. Prices were also bolstered by a stronger euro after a strong pledge of support for the ailing euro zone by European Central Bank chief Mario Draghi.

He said the bank would do whatever it takes to protect the euro zone from collapse and preserve the single currency.

(Reporting by Josephine Mason; editing by M.D. Golan)

Source: http://in.reuters.com/article/2012/07/26/markets-cotton-idINL2E8IQGYM20120726