World Cotton Market Reacts to Indian Export Ban
April 29, 2010 Last week, the Government of India announced that it is suspending registration of cotton exports and shipments from the country in an effort to boost domestic supplies and moderate prices. India is the world’s second largest cotton grower and one of the world’s major exporters of the fiber. Understandably, this move has caused ripple effects across the globe.
In India, the Cotton Association of India is asking the government to withdraw the ban because exporters will be subject to both monetary losses and legal claims
“The registered but unshipped quantity as reported by the Textile Commissioner’s office on the day of the announcement is around 25 lakh bales. These contracts between Indian exporters and their foreign buyers have been entered into several weeks ago and exporters had prepared for shipments after registering these with the Commissioner’s office,” Dhiren N. Sheth, president of the Cotton Association of India told indianexpress.com.
Sheth also stated that “local prices have risen only because of continuous purchases by spinners who have been realizing excellent value for their yarn and in reaction to higher cotton prices in the international market.”
In China, the State-owned Assets Supervision and Administration Commission stated that the world’s largest cotton importer faces “an imminent cotton shortage after India halted exports and demand climbed” and that China’s cotton deficit will be “about 310,000 metric tons before the new crop comes onto the market,” according to a report on Bloomberg.com.
The Bloomberg.com report also noted that “China’s economic growth of 11.9 percent in the first quarter is spurring textile consumption while cotton output last year shrank on reduced planting.”
“We will have to turn to the U.S. cotton after India’s decision to halt exports, but that’s still not enough,” Yuan Renqing, analyst at Xinhu Futures Co., told Bloomberg.com.
The website tazakhobor.com says that Bangladesh may be one of the hardest hit by the move. According to the website’s report, Bangladesh “buys 30 percent of its annual need of 40 lakh bale of cotton from India.”
Abdul Hai Sarker, president of the Bangladesh Textile Mills Association, said “The decision will increase our production cost and also make it difficult for us to reach (send) our products in time to the importers.”
Who will be counted on to export more cotton as a result of India’s decision? Early indications are that growers in the United States, Australia, Brazil and West Africa will benefit from the move with increased demand for their products.
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