Cotton farmers, traders to bear the brunt of the export ban | SupportBiz

Vertical View

Cotton farmers, traders to bear the brunt of the export ban

With a bumper cotton crop, farmers were betting on exports to keep prices afloat. Ginning mills in Gujarat to observe a two-day bandh to protest the ban.

Cotton prices in the international markets were up by about 5% after India, the second-largest grower and exporter of the cash crop worldwide, imposed a blanket ban on raw cotton exports on March 5, reports The Economic Times (ET).

Now, ginning mills in Gujarat have declared a two-day bandh, even as farmers across the country continue protesting the ban. A bumper crop and lower demand from textile mills has many cotton farmers in the tight spot – they are sitting on almost 40% of the harvest, or about 12.5 million bales, and were looking at exports to keep prices afloat, ET reports. Ironically, a March 3 meeting of secretaries from the textiles, agriculture and commerce ministries took stock of the demand-supply situation and decided on the ban to ensure sufficient supply of cotton to local mills, the article said. 

Prices on ICE US rose over four percent at USD0.93 a pound, reports the Hindu Business Line (HBL).  

Ginning mills in Saurashtra will shut shop on March 7 and March 8, according to a second HBL article, from Gandhinagar. The president of Ginners Association Bharat Vala says some 1,000 ginning mills will observe the bandh. Gujarat’s chief minister Narendra Modi mentioned that an export ban on cotton in 2011 resulted in an INR14,000 crore loss to growers.

Rajkot Marketing Yard president Hardevsinh Jadeja says trading of cotton was suspended because prices fell by about INR40 per ton since the March 5 ban, the HBL article added. 

The ban was imposed owing to higher than anticipated exports. It was also necessary to prevent exporters from sending shipments on a consignment basis to sister outfits abroad (a way to hoard cotton in bonded warehouses abroad), according to a commerce ministry statement. But traders point out that there are safeguards, under the transfer pricing rules, which ensure that contracts are signed at market prices, even between sister companies. Markets, and even India’s agriculture minister Sharad Pawar were all caught off guard. “It's news to me. I was not consulted. I will make a detailed enquiry before commenting anything further,” said the minister, who had opposed an export ban in 2011, on the sidelines of the national conference on agriculture, ET reports.