China will auction an initial 1 million metric tons of cotton from its bulging State stockpiles over the next two months and will also consider purchasing when the harvest starts later this year, the country’s top economic planner said on Tuesday [30 June 2015]. While the State sale will add to local cotton supplies, purchases during the harvest in September will keep a floor under domestic prices, helping the world’s top consumer of the fiber gradually reduce stocks without depressing the market. The aim is “to release and then buy in, sell out more and buy in less, in order to use up State reserve stocks”, the National Development and Reform Commission said…Full Article: China Daily July 2015

Key Point

  • According to the NDRC, from July to August 2015, China will auction 330,000 MTs of 2011’s cotton crop at CNY 13,200 (~US$2,125) per MT, 470,000 MTs of 2012’s crop at CNY 14,200 (~US$2,286) per MT, and 200,000 MTs of 2012’s imports (not domestic) at CNY 15,500 (~US$2,495) per MT.

ChinaAg Comments

  • In June 2015, China’s NDRC announced plans to sell off the country’s cotton stockpile (~10 million MTs as of mid-2105). According to an NDRC official, it will take China several years to sell and consume its current cotton stockpile.
  • 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$ 2,284.50) 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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