Photo: AP Images
The Indian government is flip-flopping on its cotton export ban and it’s rattling global cotton prices.On March 5, the country’s Directorate General of Foreign Trade issued a ban on cotton exports pushing international prices to spike by around 5 per cent in one day. Local exporters were being forced to pay heavy penalties for not honouring their commitments to international buyers.
So, while prices crashed in India’s domestic market as policymakers had hoped for, they surged abroad. The Associated Chambers of Commerce and Industry of India (ASSOCHAM) said it was never in favour of the ban.
Nevertheless, prices quickly receded on a cotton supply report and speculation that India’s ban would soon be lifted.
Following protests from Indian farmers, traders, India’s Congress party (in an election year), and China, the largest importer of Indian cotton, the Indian government lifted its ban yesterday.
But that’s not the end of it.
In a statement issued today, India’s trade secretary said nearly 2.5 million cotton bales registered for shipment before the ban was put in place would be cleared for export. However, no new export certificates would be issued for at least 10 days.
So, no ban, but no new export permits either.
Here’s a chart showing the weekly performance of NYMEX Cotton prices which had surged to just shy of $0.94 per pound after the ban, and have now fallen to about $0.88 per pound. Prices started to decline as protests in India and China grew, but have moved higher since this morning.