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India lifts cotton export ban

By Song Shengxia (Global Times)

08:02, May 02, 2012

The recent lifting of a ban on cotton exports by India will bring down prices of the commodity on the international market but will have a limited impact on demand from China, analysts said yesterday.

"The opening of exports of cotton from India will add to the already ample supplies in the cotton market and push down prices on the international market," Chen Jing, an analyst with CITICS Futures Company, told the Global Times yesterday.

"But India's potential to export more cotton is limited because the quantity used for exports has reached the highest level in five years and is already above the limit for the year. So the lifting of the ban will have a limited impact on meeting China's demand for cotton," Chen said.

India's trade ministry banned cotton exports last month to prevent the possibility of a cotton shortage in the domestic market after record overseas sales, but the policy drew criticism from Indian farmers and complaints from importers.

After some heated debates, the ministry decided to allow a limited amount of cotton to be shipped in April. And Indian Trade Minister Anand Sharma announced Monday that the government had decided to lift the ban on cotton exports.

India is the second largest cotton producer in the world after China, and China is traditionally India's biggest buyer of cotton.

"The changeable policies impacted China's enthusiasm to purchase cotton from India. Besides, cotton from the US is a good alternative to India's supply," Chen noted.

On March 31, China suspended its cotton purchases from the international market. The nation had begun a program of buying cotton last September in order to replenish government reserves, and also to stabilize domestic farm prices and hedge against price volatility.

In April, China resumed buying cotton from the US, purchasing 90,964 bales of upland cotton, making up 63 percent of the 144,805 bales sold to all foreign buyers in the week ending April 19, according to data from the US Department of Agriculture.

"China will continue to buy cotton from the international market since the international price is lower than the domestic one. The US and Bangladesh are likely to be the priority suppliers due to their steady supply and stable policies," Hu Biliang, an agriculture researcher with the Chinese Academy of Social Sciences, told the Global Times yesterday.

"China's demand for cotton is expected to decline in the next few months given the dramatic drop in exports of textile products recently," he said.

The index of new export orders for China's textile industry remained below 50 percent in March, indicating a contraction, according to the official data released yesterday by the China Federation of Logistics and Purchasing.

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