The weight of uncertainty in the coming crop year has shifted to how much China will release

The weight of uncertainty in the coming crop year has shifted to how much China will release

Changes to Chinese policy on building up its reserve of cotton stocks could create more available supply, and keep prices down in the future, according to a new report.

Cotton Inc's August report highlights the Chinese government’s announcement this spring that it will no longer make purchases through its reserve system, as has happened for the past few years.

“Correspondingly, the weight of uncertainty in the coming crop year has shifted from how much China will absorb to how much China will release, and available stocks for the next several crop years should be considered to be the sum of world-less-China stocks and an unknown proportion of Chinese reserves,” the report says.

“This implies an even greater increase in available stocks than is described by the record world-less-China figure forecast for the current crop year, and suggests prices could remain at levels closer to those from 2006/07 than those from 2011/12.”

Cotton Inc also reported that December cotton future prices were down in New York throughout July, before holding firm at about 62-64 cents per pound (c/lb) recently.

Meanwhile, the A Index fell sharply on 1 August, when delivery terms shifted to after the 2014/15 harvest, with recent pricing levels of 73c/lb the lowest since 2009.

China’s CC Index remained stable in international terms at close to 126c/lb thanks to a strengthening of the renminbi against the dollar.

Spot rates for India’s Shankar-6 variety fell in international terms from near 90c/lb to close to 84c/lb, and Pakistani spot rates declined more sharply, down nearly 10c/lb to 64c/lb.