World’s second-biggest cotton producer to scrap ban after protests from growers, China


India, the world’s second-biggest cotton producer, scrapped a one-week-old ban on exports of the fiber after protests from growers, traders and China, the nation’s biggest buyer.

“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 Sunday.

The ministry will publish details for repealing the March 5 ban Monay, Sharma said. India barred exports to secure domestic supplies after sales exceeded the government’s estimate of the country’s exportable surplus. The resumption of international sales 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 Sunday. “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 government then 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 step damaged international trade.

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 Friday.

The world will have a record trade surplus of 2 million bales of 218 kilograms if India exported all the cotton registered, Morgan Stanley analysts led by Hussein Allidina said in an e-mailed report on Friday. “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 Thursday. 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, England-based International Cotton Association, which handles contract arbitration, has said the prohibition will “have a major, detrimental impact” on global trade. (Bloomberg)

India is set to supply 17 percent of global exports in 2011-2012, the U.S. Department of Agriculture estimates. (Bloomberg)