India announced Monday an immediate ban on all cotton exports until further notice, abruptly cutting off the world's second-largest exporter of cotton from global buyers in the second such move in two years.
News of the ban, which includes volumes already registered with the government that traders have yet to ship, sent global cotton prices soaring, especially in China, which buys 80 percent of India's cotton exports.
The agency gave no reason for the ban, but industry executives told the Wall Street Journal the government may be trying to curb exports to keep local prices down. Other analysts said the ban was to ensure that domestic textile customers, whose profits have been under pressure from rising prices, have enough cotton.
India's state-run Cotton Advisory Board estimated cotton exports in the year started Oct. 1 to reach 8.4 million bales. Cotton production is expected to reach a record 34.5 million bales in 2011-2012, up from 33.9 million bales a year earlier.
There was no need to ban cotton exports, Prem Malik, deputy chairman of Confederation of Indian Textile Industry, said. Probably the government was concerned about the quantity that was already registered to be exported. The registered quantity was more than the government's estimate of exportable surplus.
The ban will impact India's biggest cotton buyer China, which accounts for about 80 percent of the nation's cotton exports, as well as Pakistan, Bangladesh and Thailand, its next-largest markets. India's ban may boost demand for cotton from the United States, the world's biggest cotton exporter.
The ban was not well received inside India.
Dhiren Sheth, president of the Cotton Association of India, told Bloomberg the move was regrettable and called on the government to immediately review its decision.
India banned exports of cotton in April 2010, which it eventually lifted before the year's end, but not without enforcing more stringent licensing rules for exports. It undid all the restrictions last August, only keeping registration requirements with the Directorate of General Foreign Trade.
India was poised to ship 6.25 million bales of cotton this year, according to estimates by the U.S. Dept. of Agriculture, with the U.S. predicted to lead the world in exports of the fiber with 11 million bales.