On the ICE Futures U.S. Exchange, cotton futures for May delivery traded at USD0.9038 a pound during European afternoon trade, dropping 1.15%.
It earlier fell by as much as 1.75% to trade at a two-day low of USD0.8976 a pound. Prices surged to USD0.9416 a pound on Tuesday, as markets digested news of an unexpected Indian export ban, the second in nearly two years.
The surprised announcement fuelled fears over tighter global supplies and sent cotton prices soaring.
But prices continued to give back gains as pressure mounted on India’s Prime Minister, Manmohan Singh, to withdraw the country’s export ban.
India’s Farm Minister Sharad Pawar said on Tuesday that he asked for the export ban to be revoked, less than 24 hours after it was announced.
“I have raised it with the prime minister,” Pawar said. “It is highly objectionable and it’s up to the prime minister now to take a view.”
Earlier Wednesday, Narendra Modi, the chief minister of Gujarat, India’s second-ranked cotton producing state after Maharashtra, told Prime Minister Singh that he was “shocked” by the export ban, which he termed “disastrous” for Indian cotton farmers.
Meanwhile, Anand Sharma, India’s Commerce Minister who imposed the ban defended his decision, saying it was taken after surging exports raised fears of depleting domestic supplies.
A government panel will discuss the ban on Friday, the textile secretary said.
Cotton production in India is expected to reach a record 34.5 million bales in the 2011-12 marketing year, up from 33.9 million bales last year.
India, the world’s second largest cotton exporter after the U.S., has already exported nearly 9.5 million bales in the current marketing year, according to the Indian Cotton Federation.
The figure is well above the government’s full-year forecast of 8.4 million bales, as exporters took advantage of the price differential amid firm overseas demand, specifically from China.
China accounts for more than 70% of India’s cotton exports.
Meanwhile, agricultural commodity traders continued to focus on talks surrounding Greece’s debt swap deal ahead of Thursday’s deadline.
There is uncertainty over how much participation Greece will see for its bond swap. The Greek government has set a minimum 75% participation rate to proceed.
A failure to agree on the swap would put the country back on the brink of a messy sovereign debt default and could reignite fears about the collapse of the single currency.
Demand for cotton, as a non-food agricultural commodity, is seen as more closely linked to economic conditions and consumer sentiment than that for other farm crops.
Elsewhere, on the ICE Futures Exchange, coffee futures for May delivery added 0.4% to trade at USD1.9353 a pound, while sugar futures for May delivery rose 0.95% to trade at USD0.2429 a pound.