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China's cotton reserves weigh heavily on global prices: icac

China's cotton reserves weigh heavily on global prices: icac Source:
Date: 05-12-2013
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The International Cotton Advisory Committee (ICAC) has said that China’s reserves and import policies weigh heavily on international prices. So far in 2013-14, China has bought more than 2.7 million tons and its total cotton reserves have passed 10.1 million tons, a statement said.
In April, the secretariat’s projected price for the current season was 118 cents per pound. Since then, ICAC’s projected price has plummeted, and the current midpoint of the forecast range is 88, it said.
It also said that in the last two seasons, China imported much of the surplus stocks from the world market, allowing prices to remain relatively high. This season its imports are expected to decrease 40 percent from the last season to 3.1 million tons.
The sale price of cotton from China’s reserve is significantly higher than the import price with a 40 percent tariff. Thus, unless international prices rise above the mid-90s and imports would be lower-than-expected, China’s imports are projected to remain around 3.1 million tons for the season.
On November 26, China National Cotton Reserves Corporation (CNCRC) announced that it will begin selling cotton on November 28 at 18,000 yuan per ton, or 133 cents per pound, using the current exchange rates for standard grade starting with its 2011 reserves.
Although there is no planned volume of sales from the reserves, the ICAC Secretariat is assuming that CNCRC will sell roughly two to three million tons so that China’s ending stocks for the season will be around 11 to 12 million tons, the statement said. As was the case for the last three seasons, 2013-14 world production is expected to outpace consumption with 2013-14 world production projected at 25.6 million tons, down by 1.2 million tons from the last season.
World cotton consumption is forecast at 23.8 million tons in 2013-14, up by two percent from the last season with an upward revision of 85,000 tons in India from last month, it added.
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