Forexpros – Cotton futures slumped on Monday, trading close to the lowest level since late December, after India revoked a controversial one-week ban on fiber exports, adding supplies to a market that is already viewed as oversupplied.
On the ICE Futures U.S. Exchange, cotton futures for May delivery traded at USD0.8812 a pound during European afternoon trade, shedding 0.77%.
It earlier fell by as much as 0.9% to trade at USD0.8800 a pound, the lowest since March 2, when prices tumbled to a three-month low of USD0.8782.
Trading on the cotton market has been dominated by developments surrounding a cotton export ban from India during the past week.
Futures rallied 4.5% to hit USD0.9416 a pound on March 5, after India unexpectedly announced that it banned all cotton exports for the second time in nearly two years.
But prices have been on the defensive ever since amid doubts the country will follow through with the ban.
On Sunday, India’s Trade Minister Anand Sharma validated the market’s speculation over the move, lifting the ban just a week after imposing it following protests from growers, traders and China, the nation’s largest cotton customer.
“Keeping in view the interests of the farmers, industry, trade, a balanced view has been considered by the Group of Ministers to roll back the ban,” Trade Minister Sharma said in a statement Sunday.
On Monday, Commerce Secretary Rahul Khullar said that shipments of as much as 3.5 million bales registered with the ministry prior to the ban will need to be revalidated.
Khullar said that fresh registrations will not be permitted until further notice, adding to the confusion over India’s export situation.
The Directorate General of Foreign Trade will revalidate the permits within 10 days and a panel headed by Finance Minister Pranab Mukherjee will meet in two weeks to discuss exports, Textiles Secretary Kiran Dhingra said earlier.
India imposed the ban on March 5, after surging exports raised fears of depleting domestic supplies.
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.
Also adding to the downward pressure on prices, the U.S. Department of Agriculture on Friday raised its forecast for world cotton production to 123.64 million bales in the current marketing year, up from 123.34 million.
The agency also reduced world consumption to 108.72 million bales from 109.71 million.
Elsewhere, on the ICE Futures Exchange, coffee futures for May delivery tumbled 1.8% to trade at USD1.8232 a pound, while sugar futures for May delivery dropped 1.2% to trade at USD0.2332 a pound.
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