Cotton Prices Soar After World’s Second-Largest Producer Ban Exports
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The Indian government, the world’s second largest producer of cotton behind China, has unexpectedly announced an immediate ban on all of its nation’s cotton exports – a move that has stunned the global markets and enraged shippers, sellers and growers in the country.
The Indian government, the world’s second largest producer of cotton behind China, has unexpectedly announced an immediate ban on all of its nation’s cotton exports – a move that has stunned the global markets and enraged shippers, sellers and growers in the country.
According to a government statement published on Monday evening, the Indian Directorate General of Foreign Trade (DGFT) said that ban was imposed due to higher than anticipated exports of the fibre this year, with authorities fearing that foreign buyers were hoarding cotton in bonded warehouses abroad.
“Export of cotton has been prohibited till further order,” said the notification issued on the DGFT website. “Further export against registration certificated already issued will also not be allowed.”
India has already exported 8.5 million bales of cotton Is the financial year ending March 31st, more than the government estimate of 8.4 million. If the ban had not been imposed, India’s cotton exports would have reached almost 10 million bales for the period, said Siddhartha Rajagopal, the executive director of the Cotton Textiles Export Promotion Council.
Still, the local cotton industry expressed fury at the government’s decision of an immediate ban, particularly as 1.5-3.5 million bales of pre-ordered cotton, mainly by China, were yet to be filled.
[quote]”The ban is a wrong move by the government. It will dent global confidence in India which is the world’s second-largest cotton grower and exporter,” said Bhadresh Mehta, additional vice president of the Cotton Association of India, to the Economic Times.[/quote]“India is proving to be an unreliable source of cotton,” added John Flanagan at Flanagan Trading to AFP. Flanagan also believed that the cotton ban from India would likely bear fruit for US producers, who are now likely to fill the void left by India.
“Chinese buyers will decide whether they look for a new (producer) which will mainly be the US,” said Flanagan, as cotton future prices shot up on the ICE exchange in New York. The benchmark contract for May delivery rose the daily maximum of four cents in early trade to 92.23 cents per pound and held there for the rest of the session. On India’s MCX Kapas, cotton futures for April also eased by four percent based on expectation of improved supplies.
Related: The Textile Industry
Related: Growth of Indian Textile Industry
According to analysts at Barclays Capital, “Global cotton inventories are likely to rise almost by a third year-on-year, taking inventories to a two-year high and providing a buffer to the market.”
The Indian ban will also be “a game changer”, added Penson/FCG analyst Sharon Johnson to the Washington Post, who cited the US, Brazil, Uzbekistan and the African-French zone as the possible markets for cotton in the future.
“Pulling India out, at this point, is going to ship business our (the US) way and it also just cuts off however much more cotton that we thought was going to be available to the world,” noted Johnson.
