India, the world’s second-biggest cotton producer, will end a ban on exports after protests from growers, traders and China, the nation’s biggest buyer.
“Keeping in view the interests of the farmers, industry, trade, a balance view has been considered by the Group of Ministers to roll back the ban,” Trade Minister Anand Sharma said in an e-mailed statement today.
The ministry will publish details for repealing its March 5 ban tomorrow, Sharma said. India banned shipments to secure domestic supplies after sales exceeded the government’s estimate of exportable surplus. Resumption of exports 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 today. “The government decision will help avoid disputes and arbitration in international markets.”
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 country’s Textile Ministry said.
The ban drove prices up by the daily limit on March 5, and to 94.24 cents, the highest level since Feb. 17. The May- delivery contract fell 0.9 percent at 88.80 cents on ICE Futures U.S. on March 9.
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. “Alternately, Indian exports would likely crowd out incremental U.S. exports, portending to large-scale U.S. export sale cancellations through the balance of the marketing year,” Morgan Stanley said.
The brokerage lowered its 2011-2012 price estimate to 90 cents a pound from $1, citing weak global demand.
The prohibition damages international trade, the China Cotton Association said on March 8. The association, supervised by China’s Ministry of Civil Affairs, “hopes that the Indian government revokes the incorrect policy,” it said. The Chinese association is the country’s biggest trade group for the fiber and has farmers, cooperatives and users as members, according to its website.
The Liverpool, U.K.-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.