The Indian Ministry of Commerce reversed its ban on cotton exports today, following protests from cotton producing states and the Ministry of Agriculture. In a reversal, the company will allow future exports, but has decided to scrutinize existing export contracts that predate the ban, covering cotton that has yet to be shipped.
China has been stockpiling cotton and has accumulated almost 4 million tons in this growing season. That stockpiling has increased cotton prices slightly as well. The majority of India’s export cotton goes to China, indicating that China may be trying to insulate its domestic manufacturers against supply disruptions.
The Wall Street Journal, covering a report from the International Cotton Advisory Committee, pointed out that the ban has yet to affect the Cotton A price, which has lingered at around $1.00 per pound. However, their report stated that the longer the ban remains in effect the more likely it is that it will raise prices.
The trajectory of the cotton ban since its March 5th imposition has been hectic. Protests from the Minstry of Agriculture were followed by international protests and led to a swift reversal. The nation then reversed that reversal, agreeing to allow exports from preexisting contracts but maintaining a ban on future exports.
It now appears that India will reverse its ban. The political wrangling over the issue has rattled investor confidence in Indian cotton and led factories to seek supplies elsewhere. It reflects the deep divide within the Indian government between skeptics and supporters of globalization, as well as region tensions stemming from China’s rise.