MUMBAI: Cotton output in India, the world's third-largest producer, is expected to reach a record 25 million tonnes this year, thanks to good weather, higher land under the crop and more usage of genetically modified seeds. India had produced about 23.5 million bales of 170 kg each in 2004, the best ever.

"The crop condition is excellent," said Ashok Kapur, a trader based in the northern state of Punjab. "We are witnessing hot and dry weather conditions, coupled with western winds. Such a situation is very good for the crop which is flowering now."

Traders said delayed rains at the time of sowing in June in certain areas and recent floods in parts of western India damaged crops to some extent, but overall condition was good. Monsoon showers in early August after a dry spell improved crop prospects. If more rains come at the end of this month, crop yields would get a further boost, traders said.

"Rains were well timed and just as required," said R K Baldua, vice president of Gujarat Ambuja Exports Ltd, a leading producer of cotton in the western state of Gujarat. India has the world's largest area under cotton and this has risen by 5 to 7 per cent this year from about 9 million hectares last year, as many farmers shifted from paddy and tobacco, anticipating higher returns, traders said. Yields were expected to be better this year with the growing popularity of genetically modified cotton, which was introduced in the country in 2002.

The share of transgenic cotton has been estimated at about 90 per cent of total plantings in Gujarat, India's largest cotton producer, nearly 75 per cent in the neighbouring western state of Maharashtra and some 60 per cent in northern India. Overall coverage under the genetically modified cotton has more than doubled this year from the previous year following the launch of new varieties and improved supply of hybrid seeds. "The impact of GMO seeds is bound to come on cotton. Yields will definitely rise," said Baldua.

Prices may drop: Domestic cotton prices are expected to fall to near 10-year lows after the start of cotton pluckings in October as a likely bumper crop will dampen sentiment, traders said. Prices of Shankar cotton have been little changed at about 16,500 rupees a candy of 356 kg in the past month, but could drop by 1,000 rupees with the harvesting of the new crop, they said.

"But prices may not fall beyond that level as the government may start buying cotton to lift prices and exports may rise," said I J Dhuria, a general manager with Punjab-based Vardhman Spinning and General Mills Ltd. Prices would also get support from a rise in cotton consumption by mills as many companies have increased their production capacities, traders said.

Traders said India's cotton exports could rise to about 1.5 million bales in the marketing year to September 2006 to countries such as China, Pakistan, Bangladesh and Indonesia from nearly 1 million this year.