* India's monsoon in 2014 forecast to be below average
* Cotton farmers using more high-yielding seeds, raising
* Seed firms benefit; Kaveri Seed shares outperform mkt over
By Meenakshi Sharma
MUMBAI, June 12 Worries about weak monsoon rains
this year have prompted Indian cotton farmers to use more hybrid
seeds that need less water and have a higher yield, boosting
shares of companies such as Kaveri Seed Co.
Some farmers are also raising cotton acreage as the crop is
generally less water-intensive, a trend that will help increase
output and pressure global prices that are also likely to
be squeezed by an expected rise in U.S. production.
The United States is the world's biggest exporter of the
fibre, while India is the No. 2 producer and exporter.
India's monsoon is expected to bring below-average rainfall
in 2014, potentially lowering grain yields as half of the
country's farmland lacks irrigation. However, the impact of the
El Nino weather phenomenon - which can cause drought in South
Asia - is likely to be weak in India.
Farmers in India start sowing cotton by the end of May and
harvesting commences from end-September. Many cotton-growing
farmers this time around are using expensive but high-yielding
seeds to ensure productivity does not suffer.
K.B. Jadeja, a farmer in the western Indian state of
Gujarat, the top cotton cultivating state, said he bought seven
varieties of high-yield hybrid seeds from local firms. Seed
suppliers such as Kaveri Seed and Maharashtra Hybrid Seed Co
(Mahyco) are beneficiaries of purchases by the farmers.
"The cotton seed supplier companies would make money because
the sale of seeds, especially rain-resistant varieties would be
more this season," said Prerana Desai, vice-president of
research at Kotak Commodities.
Kaveri Seed shares are up about 12 percent in the past
month, outpacing the 8 percent gain in the broader index
. The company did not respond to emails seeking comment.
"We expect (sales) to grow reasonably well at about 8-10
percent in volumes this season," said Subbarao A.R., strategic
business head of Mahyco's cotton business.
"There are many options of good hybrids with tolerance to
water stress available to farmers in the market."
Farmer Jadeja said he has cut down area under groundnut
cultivation this season, due to the potential water scarcity.
"I've increased the area under cotton by 20 acres to 150
acres this season as prices are attractive and risk factor is
less compared to other crops like groundnut," Jadeja told
Reuters over the phone from Gujarat.
In the previous sowing season, farmers sprinkled cotton
seeds in 11.5 million hectares and the estimated yield was 551
kilogram per hectare, according to the state-run Cotton Advisory
Board (CAB). Subbarao of Mahyco said cotton acreage could go up
about 5 percent this year.
CAB estimates India's cotton output at a record 37.5 million
bales for 2013/14, with exports of 9 million bales. Most of that
goes to China.
In the spot market, the most-traded Shanker-6 variety of
cotton has been quoted at 41,700 rupees ($700) per candy of 356
kg on Wednesday, a rise of more than 6 percent since the same
period a year ago.
($1 = 59.3000 Indian Rupees)
(Editing by Krishna N Das and Muralikumar Anantharaman)