Export Ban Cools Cotton Prices in India

By Jim.Robinson|May 6, 2010

As the world continues to react to last month’s major decision by the Government of India to suspend the registration of cotton exports and shipments until further notice, sources within India say that the move has produced some immediate results.

The Cotton Corporation of India Ltd. (CCI), a governmental marketing organization, reports that the ban has already begun to achieve its goal of pulling down domestic cotton prices, particularly in Gujarat, the country’s largest cotton manufacturing state. In a news release, CCI stated that the domestic prices for the popular variety of Shankar-6 had declined about Rs 2,000 per candy — from Rs 29,000 per candy to Rs 27,000 — after the ban. Each candy weighs about 356 kilograms.

CCI also stated that after the ban, “domestic mills have preferred to observe a wait and watch policy” and that “domestic cotton prices in the coming week may continue to rule lower than the peak level.”

For its part, the Indian commerce ministry “has expressed its displeasure over the textile ministry’s ban on raw cotton exports, describing the action as being done ‘in haste and panic,’” according to a report on the website, Yahoo! India.

A high-ranking source in the commerce ministry told the website that “the textile ministry wants farmers to sell cotton for cheap. If you ban the export, the farmer has no choice — he has to sell it for cheap.” He also stated that “cotton growers in Gujarat and Maharashtra will suffer the most. Because the ministry has made growing cotton unprofitable for farmers and exporters, growers may sew other crops which would be less likely to endure government intervention.”