India, the world’s second-biggest cotton producer, scrapped a one-week-old ban on exports after protests from growers, traders and China, the nation’s 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. Shipments of as much as 3.5 million bales registered with the ministry prior to the ban will need to be revalidated, Commerce Secretary Rahul Khullar said today. Fresh registrations will not be permitted until further notice, he told reporters in New Delhi.
India barred exports to secure domestic supplies after sales exceeded the government’s estimate of the country’s exportable surplus. The resumption of shipments may add to global supplies and pressure futures, which have fallen 55 percent in New York in the past year.
The Directorate General of Foreign Trade will revalidate the permits issued prior to the ban in less than 10 days and a panel of ministers headed by Finance Minister Pranab Mukherjee will meet in two weeks to discuss exports, said Kiran Dhingra, textiles secretary.
“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.”
Cotton in India climbed the most in more than a week today. The April-delivery contract surged as much as 3 percent to 848.50 rupees ($17) per 20 kilograms and traded at 834 rupees at 12:04 p.m. Mumbai time on the National Commodity & Derivatives Exchange of India Ltd.
Futures in New York fell for a fifth day, the longest streak since September. 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 88.06 cents at 12:06 p.m. in Mumbai. 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.
India suspended sales after shipments surged to about 9.5 million bales of 170 kilograms each, more than the surplus of 8.4 million bales estimated by the government. Traders had registered to ship 12 million bales, the Textiles 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.
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.