Cotton futures trade close to 3-month low amid India confusion


Forexpros – Cotton futures declined on Wednesday, trading close to the lowest level since late December, as ongoing confusion over a cotton export ban from India weighed on the fiber.

On the ICE Futures U.S. Exchange, cotton futures for May delivery traded at USD0.8772 a pound during European afternoon trade, shedding 0.37%.

It earlier fell by as much as 0.5% to trade at a session low USD0.8764 a pound, the lowest since March 12, when prices tumbled to a three-month low of USD0.8717.

Trading on the cotton market throughout the past two weeks has been dominated by developments surrounding a cotton export ban from India.

On March 5, India unexpectedly announced that it banned all cotton exports for the second time in nearly two years.

But less than a week later, India’s Trade Minister Anand lifted the controversial ban following protests from growers, traders and China, the nation’s largest cotton customer.

Earlier this week, Commerce Secretary Rahul Khullar said that shipments of as much as 3.5 million bales registered with the ministry prior to the ban will need to be revalidated.

Khullar said that fresh registrations will not be permitted until further notice, adding to the confusion over India’s export situation.

India’s flipflop over the ban prompted the International Cotton Advisory Committee to warn that the confusion has created uncertainty in the market.

The ICAC warned that in the long term, textile mills around the world, especially in importing countries, could switch to polyester where supplies are more stable.

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.

A broadly stronger U.S. dollar also added to the downward pressure on prices. The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, was up 0.2% to trade at 80.80, the highest since January 18.

A stronger dollar reduces the appeal of U.S. crops to overseas buyers and makes commodities less attractive as an alternative investment.

The dollar’s gains were fuelled by an upbeat assessment of the U.S. economy by the Federal Reserve, which reduced expectations for a third round of U.S. monetary easing by the central bank.

Elsewhere, on the ICE Futures Exchange, coffee futures for May delivery rose 0.35% to trade at USD1.8572 a pound, while sugar futures for May delivery added 0.45% to trade at USD0.2411 a pound.