China said on Thursday [11 June 2015] it will start selling its massive cotton stockpiles this year, in a move likely to depress demand as the country’s mills hold off buying in anticipation of sales of discounted fiber. Market rumours have swirled for weeks that China was preparing to release some of its holdings, which have swelled to around 10 million tons-more than 40 percent of world stocks. China, the world’s top consumer of the fiber, would issue detailed sale plans in the next 10 days, Yin Jian, an official at the National Development and Reform Commission, told an industry conference…Full Article: China Daily June 2015

Key Point

  • According to an NDRC official, it will take China several years to sell and consume its current (as of mid-2015) cotton stockpile.

ChinaAg Comments

  • In 2014, Chinese cotton reserves reached 11 million MTs, equal to roughly half of global cotton trade volumes.
  • In September 2014, China announced that would not increase its cotton import quota beyond 894,000 MTs for 2015. At the same time, the Chinese domestic price for ginned cotton totaled CNY 14,000 (~US$ 2284.50) per metric ton. At the same, in the US futures markets, the price of ginned cotton stands at approximately CNY 11,800 (~US$1,925.50) per MT.
  • In April 2014, China’s NDRC announced it would abolish the minimum purchase price for cotton and instead would set CNY 19,800 (~US$3,224) per MT as the reference price. If the free market price falls below the reference price, then farmers will receive a subsidy based on the quantity of cotton sold in February 2015.
  • From 2012 to 2013, China’s cotton output declined from 6.8 million MTs to 6.2 million MTs. In 2013, Xinjiang accounted 56% or 3.5 million MTs of Chinese cotton production. The next largest producer was Shandong which accounted for 10% (620,961 MTs of output).
  • In mid-2011, developed market economies (e.g. countries) began curtailing their imports of Chinese-made clothing and yarn products.

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