For the second time in almost two years India's government has decided to impose a ban on all cotton exports from the country. India is the world's second largest producer of cotton - accounting for around 22% of the world's output - and the decision to ban all cotton exports is effective immediately. The ban also applies to exports of raw cotton that have already been registered but not yet shipped.
Indian apparel exporters had called for steps to curb the country's cotton shipments to China and conserve supplies for domestic textile mills instead. Their last ban on raw cotton exports began in April 2010, with restrictions lifted October 1, 2011.
The government's move is to help ensure supplies for domestic mills and manufacturers. From April 2011 to January 2012 India's garment exports jumped 21.45% to US$10.86b.
Retailers and brands that source from India might benefit from lower prices; however, those buying from Bangladesh or Pakistan are at risk, and the larger retailers sourcing from China should eye this development with caution.
The ban, if maintained, could have a much wider impact on garment prices sourced from China as the Chinese producers could be forced to gain supply from other regions. Almost 85% of India's total cotton exports thus far in 2012 have been shipped to China, the world's largest user of cotton. China would need the entire annual US crop plus some more to make up the difference.
India is in the process of building its national stockpiles in an effort to ensure domestic cotton supplies and help avoid future fluctuations in cotton prices. The International Cotton Advisory Board (ICAC) is estimating that by the end of 2012 China might hold as much as a quarter of global stocks of cotton.
As of March 5, international cotton prices for May delivery rose 4.5% to US$0.94/lb, and then settled back at $0.92/lb. This is less than half of last year's record high, when lower production in China, floods in Pakistan, capacity constraints in the US, an earlier export ban by India, and speculators playing the market pushed prices to over $2/lb.
Most recent forecasts released just before India's export ban was announced suggested international cotton prices will stay low in the 2012-13 season, thanks to a rise in global cotton stocks as production exceeds consumption.
