Cotton prices soar after India bans exports.

Cotton prices soared Monday after India banned exports of the fiber, which may send more buyers to the United States for supplies.

Cotton for May delivery rose four cents to finish at 92.23 cents US per pound. It still is less than half what it was a year ago when shrinking global inventories and stronger demand sent prices over $2 per pound.

India, the world's second-largest exporter of cotton, said that it has halted new export sales of cotton and any cotton that has been sold but not shipped also will be held in the country, Penson/FCG analyst Sharon C. Johnson said.

There was no immediate word on how long the ban would last. It marked the second time in nearly two years that India has banned cotton exports.

The announcement came after India's sales to international merchants and textile mills have increased since November because of cheaper prices.

Johnson speculated that textile mills in India have become concerned that supplies were shrinking and perhaps the remaining product is of lower quality.

Customers will have to go primarily to the U.S., Brazil, Uzbekistan or the African-French zone to buy cotton.

"This is a game changer," Johnson said. "Pulling India out, at this point, is going to ship business our way and it also just cuts off however much more cotton that we thought was going to be available to the world."

The U.S. Agriculture Department has estimated that India would produce 27 million bales and export 6.25 million bales by the end of the 2011-2012 growing season.

The U.S., the world's largest exporter, was predicted to produce 15.7 million bales and export 11 million bales. The agency's next report is due Friday.

Source : cbc.ca