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India ends export ban on cotton

New Delhi, March 11, 2012

India will lift a controversial ban on cotton exports just a week after imposing it, allowing more supplies into a global market that is oversupplied and which is likely to further push down international prices.     

The ban, announced unexpectedly on March 5, after a record 9.5 million bales had been shipped, ran into criticism from the influential farm minister, Sharad Pawar, and China, the biggest buyer of cotton from the world's second-largest producer.      

Government ministers had taken into account the interests of farmers, industry and trade in deciding to lift the ban, a statement quoting Trade Minister Anand Sharma said on Sunday.     

"A formal order will be made public tomorrow by the Government," he added.     

Indian exporters had some 2.5 million bales outstanding for overseas sales when the ban - aimed at protecting domestic textile mills - was imposed. That put total supplies into exports since October 1 at 12 million bales - well above the government's projections of 8.4 million bales set in January.     

"It's good news as far as (exporters) and farmers are concerned, said Nayan Mirani, vice-president of the Cotton Association of India, which groups exporters and traders.     

"We must realise that we are a cotton surplus country and our surplus needs to be exported. These are short-sighted views that (the textile) industry sometimes takes by asking to ban cotton exports."     

New York cotton futures, which had ended limit up on Monday when the ban was announced, closed lower on Friday after USDA estimated higher production worldwide. The May ICE futures contract closed down 0.76 cent to 88.80 cents per lb.     

"There could be more downside pressure in international markets due to more supplies from India," said Chowda Reddy, senior analyst with JRG Wealth Management in Hyderabad, adding domestic prices could rally on supply concerns.     

The short-lived ban is the latest policy U-turn by India on exports, as the country tries to balance the huge demands for commodities of its 1.2 billion population with its global role as one of the world's biggest producers.     

The USDA upped world 2011/12 cotton production to 123.64 million (480-lb) bales, from 123.34 million and reduced world consumption to 108.72 million bales from 109.71 million in its report on Friday.      

Cotton ended 2011 as the worst-performing commodity market of the year, falling 37 per cent from 2010 as record prices boosted output and decimated demand, while a shaky global economy scared off investors.      

China is expected to cut imports by one million bales in 2012/13 from about 17 million bales in the current cotton year, according to the US Agriculture Department. – Reuters




Tags: agriculture | India | Exports | cotton | New Delhi |

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