India, the worldΆs second-biggest cotton producer, scrapped a one-week-old ban on exports of the fiber after protests from growers, traders and China, the nationΆs largest customer. Prices dropped.
“Keeping in view the interests of the farmers, industry, trade, a balanced view has been considered by the Group of Ministers to roll back the ban,” Trade Minister Anand Sharma said in an e-mailed statement yesterday.
The ministry will publish details for repealing the March 5 ban today, Sharma said. India barred exports to secure domestic supplies after sales exceeded the governmentΆs estimate of the countryΆs exportable surplus. The resumption of international sales may add to global supplies and pressure futures, which have fallen 55 percent in New York in the past year.
“This will help farmers get a higher price immediately, at least 10 percent more, and encourage cotton planting for next year,” Dhiren Sheth, president of the Cotton Association of India, said in a phone interview yesterday. “The government decision will help avoid disputes and arbitration in international markets.”
The May-delivery contract dropped as much as 0.9 percent to 88.01 cents a pound in on ICE Futures U.S. before trading at 88.38 cents at 10:21 a.m. Singapore time. The ban drove prices up by the daily limit on March 5, and to 94.24 cents the following day, the highest level since Feb. 17. They fell 0.9 percent on March 9.
International Trade
India suspended sales after shipments surged to about 9.4 million bales, more than the surplus of 8.4 million bales estimated by the government. Traders had registered to ship 12 million bales, the Textile Ministry said.
The government came under pressure to withdraw the curbs after Agriculture Minister Sharad Pawar said the prohibition would hurt planting prospects and an industry group in China said the move damaged international trade.
Prime Minister Manmohan Singh reversed another policy in December. The government on Dec. 7 suspended a decision to allow as much as 51 percent overseas ownership of multibrand retail stores after protests by opposition and some allies paralyzed parliament. Singh vowed in a December interview to pursue the proposals after regional elections.
The world will have a record trade surplus of 2 million bales of 480 pounds (218 kilograms) if India exported all the cotton registered, Morgan Stanley analysts led by Hussein Allidina said in an e-mailed report on March 9. The brokerage lowered its 2011-2012 price estimate to 90 cents a pound from $1, citing weak global demand.
΅Detrimental ImpactΆ
The ban damages international trade, the China Cotton Association said on March 8. The association, supervised by ChinaΆs Ministry of Civil Affairs, “hopes that the Indian government revokes the incorrect policy,” it said. The group is the countryΆs biggest trade body for the fiber and has farmers, cooperatives and users as members, its website said.
The Liverpool, England-based International Cotton Association, which handles contract arbitration, has said the prohibition will “have a major, detrimental impact” on global trade. India is set to supply 17 percent of global exports in 2011-2012, the U.S. Department of Agriculture estimates.
