A ban on cotton shipments from India, the world’s second-largest grower and exporter, may affect as many as 2.5 million bales of the commodity, an industry group said.
The amount is for the commodity registered for export yet unshipped when the restriction was announced April 19, the Cotton Association of India said in an e-mailed statement, adding that it was “shocked” by the prohibition. The group wants registered contracts to be allowed and the ban lifted.
“It is quite likely that several of such contracts will turn into international disputes,” the group said today. “Not only will the exporters be subjected to huge losses but they will also face claims and arbitrations with their buyers.”
India this week halted registration of export contracts until “further orders” and said those registered before April 19 need to be revalidated as it seeks to cool domestic prices and boost supplies. The ban pushed cotton prices in New York to a two-year high on concern reduced exports from the nation may worsen tight global supplies.
Cotton futures for July delivery rose 0.5 percent to 85.22 cents a pound on ICE Futures U.S. in after-hours electronic trading as of 3:19 p.m. in Mumbai. The commodity rallied the maximum allowed on April 20 after India’s ban.
Reliable Supplier
“Any change in the policy of allowing free and unhindered exports would prove detrimental to the reputation of the country as a reliable and continuous supplier of cotton,” Cotton Association of India said in the statement. The ban follows the government’s decision to impose an export duty on cotton and may discourage cotton plantings, it said.
India’s Textile Commissioner will revalidate export contracts registered before April 19, allowing shipments of unshipped quantities on a monthly pro-rata basis, the commissioner said in a statement that day.
India’s cotton output will rise to a record 25 million bales in the year starting Aug. 1 from an estimated 23.5 million a year earlier, a U.S. Department of Agriculture unit said in a report on April 15.
“Cotton acreage which has seen a rising trend recently will receive a setback if farmers do not receive a fair price as per international levels as a result of the duty on exports,” the association said today.