INDIA: To review cotton export ban amid China complaints
India's prime minister is to reconsider the country's decision earlier this week to halt all cotton exports after calling a group of senior ministers to a meeting tomorrow (9 March) to review the ban.
Prime minister Manmohan Singh ordered the review after agriculture minister Sharad Pawar said he had not been consulted on the ban introduced by the Directorate General of Foreign Trade on Monday (5 March), and warned it would hurt farmers by leading to lower prices.
The reassessment also comes after the China Cotton Association (CCA) said it had sent a letter to the Indian Ministry of Commerce & Industry and the Cotton Association of India "in strong protest" at this "irresponsible act".
And cotton trade body the International Cotton Association (ICA) has also written to urge India to "rapidly reconsider its policy and revoke the ban with immediate effect to enable international contracts to be executed without further defaults and reputational damage."
The ICA believes the actions taken by India "will have serious consequences and a major, detrimental impact on world cotton trade," while the CCA adds that India "should keep to the widely recognised international trade regulations" and that "all sides in Chinese cotton and textile industry will pay serious attention to the development of this issue."
India is the world's second largest producer of cotton - accounting for around 22% of the world's output - and its decision to ban all cotton exports is the second in as many years.
"An action like this has already disturbed international cotton trade order seriously," CCA said.
China is India's biggest cotton customer, taking around 85% of India's total cotton exports so far this year.
But China is also in the process of building its national stockpiles in an effort to ensure domestic cotton supplies and help avoid future fluctuations in cotton prices - which is thought to have triggered the Indian decision.
Indeed, the International Cotton Advisory Board (ICAC) last week estimated that by the end of 2011/12 China might hold as much as a quarter of global stocks.
The Chinese association described India's restrictions on cotton trade as a "double loss" that hurts both textile firms and cotton dealers, as well as Indian domestic cotton farmers and exporters.
India banned shipments after it exported almost 9.4m bales of cotton (at 170kg each) in the current marketing year, which began on 1 October, exceeding an estimated exportable surplus of 8.4m bales.
The move is intended to ensure supplies for domestic mills and manufacturers.
However, the ICA notes that the ramifications of the previous ban in 2010 led to a huge disruption of trade, and the extraordinary rise in world cotton prices reaching unprecedented historical heights.
It warns the current ban will produce the same results and, once again, undermine India as a reliable trading partner. Customers in many importing countries who are counting on this cotton to run their spinning mills will suffer irreparable loss and damages, it said.
However, international cotton prices for May delivery yesterday (7 March) fell again on the ICE Futures US exchange in New York, dropping to US$0.90/lb from US$0.94/lb earlier in the week.
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