March 5 (Bloomberg) -- India, the world’s second-biggest cotton exporter, halted shipments until further notice, according to the Commerce Ministry. Futures rallied, and the country’s cotton association called for the curb to be reviewed.
“Export against registration certificates already issued will also not be allowed,” the ministry said in a notice posted on its website. No reason for the ban was given in the statement, which was dated today.
The country is poised to ship 6.25 million bales of 480 pounds each in 2011-2012 from a world total of 37.42 million bales, the U.S. Department of Agriculture estimates. The U.S. is set to be the biggest exporter with 11 million bales. Farm Minister Sharad Pawar said that he was unaware of the ban when questioned by reporters, declining to comment further.
“It is a regrettable step,” Dhiren Sheth, president of the Cotton Association of India, said by phone from New Delhi. “The export ban was sudden. I don’t know the reasons. I hope the government reviews the decision immediately.”
The May-delivery contract jumped as much as 4.5 percent to 92.23 cents a pound on ICE Futures U.S., the biggest intraday advance since Dec. 28, and traded at 91.19 cents at 5:01 p.m. in Singapore. Prices in New York are still down 57 percent in the past year after farmers boosted output to a record. The stockpile-to-use ratio of more than 55 percent is “sharply higher” than the past two seasons, the USDA said.
“There was no need to ban cotton exports,” said Prem Malik, deputy chairman of Confederation of Indian Textile Industry. “Probably the government was concerned about the quantity that was already registered to be exported. The registered quantity was more than the government’s estimate of exportable surplus,” he said by phone from Mumbai.
About 12 million bales of 170 kilograms (375 pounds) each had been registered for export and about 8.3 million bales had been shipped, said Malik.
“Probably they were worried that there will be less stock available than required in the country,” he said. “This may have prompted them to put a ban on cotton exports.”
The amount shipped is almost the same as an export estimate of 8.4 million bales from Textiles Commissioner A.B. Joshi on Jan. 24 after a meeting of the Cotton Advisory Board. The country shipped 7 million bales a year earlier, he said.
Cotton production in India will be lower than earlier forecast after diseases cut yields in the states of Maharashtra and Andhra Pradesh, Joshi said then. The harvest may reach 34.5 million bales of 170 kilograms each in the year that began Oct. 1, against 35.6 million bales estimated on Nov. 15, he said.
“Farmers are going to take the biggest hit,” said Sheth from the Cotton Association of India.
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