Forexpros – Cotton futures soared on Monday, rising to a three-day high after India announced that it banned all cotton exports until further notice, fuelling fears over tighter global supplies.
On the ICE Futures U.S. Exchange, cotton futures for May delivery traded at USD0.9221 a pound during European afternoon trade, soaring 4.51%.
It earlier rose by as much as 4.55% to trade at USD0.9222 a pound, the highest since February 29.
India’s Directorate General of Foreign Trade said earlier that the country has banned all exports of cotton with immediate effect, without specifying any reasons for the ban.
According to a statement from the DGFT, “Export of cotton has been prohibited till further orders. Export against registration certificates already issued will also not be allowed.”
According to market analysts, the move was designed to curb rising Indian cotton exports and ensure that domestic supplies are ample.
Some Indian textile industry groups have been lobbying for restrictions on exports to ensure adequate availability for the domestic spinning industry.
While the export ban was likely to lead to higher prices on the international market, local prices in India were set to drop.
Indian prices are around USD0.92 to USD0.93 a pound, while competing international varieties are around USD1.02 to USD1.08s, Indian Cotton Federation Secretary A. Ramani said.
Dhiren Seth, president of the Cotton Association of India, said the ban will “seriously impact” the market, noting that the local supply situation has been improving given expectations of higher production from the current crop.
Cotton production in India is expected to reach a record 34.5 million bales in the 2011-12 marketing year, up from 33.9 million bales last year.
India, the world’s second largest cotton exporter after the U.S., has already exported nearly 9.5 million bales in the current marketing year, according to the Indian Cotton Federation.
The figure is well above the government’s full-year forecast of 8.4 million bales, as exporters took advantage of the price differential amid firm overseas demand, specifically from China.
China accounts for more than 70% of India’s cotton exports.
Meanwhile, cotton traders were looking forward to the USDA’s World Agricultural Supply & Demand Estimates report for March due on Friday.
The USDA is scheduled to release another report on cotton plantings on March 30. The Prospective Plantings report is based on a poll of farmers’ planting intentions and is closely watched by the cotton futures market.
Elsewhere, on the ICE Futures Exchange, coffee futures for May delivery fell 0.8% to trade at USD1.9970 a pound, while sugar futures for May delivery declined 0.92% to trade at USD0.2482 a pound.
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