China, the world’s largest importer and consumer of cotton, “will start to sell down its massive cotton stockpile this year,” says Reuters. Beijing holds half, or more, of the world’s stockpile of cotton. Sales from the government reserve would mean less demand for imports and prolong low world market prices for the fiber. A state planner for the National Development and Reform Commission told an industry conference that detailed sales plans will be issued in the next 10 days. The official told Reuters that China’s goal was a stable market. “We will not pressure prices,” the official told Reuters.
It will take several years to draw down the state-held reserve, the official told the conference. By some estimates, China has nearly a 22-month supply of cotton in its warehouses.
“A fresh batch of sales from Chinese reserves was not unexpected by the market,” said AgriMoney, which noted China began sales campaigns from its government stocks in the early months of 2013 and 2014.
Separately, the USDA forecast a three-million-bale reduction in the cotton inventory in China in the new marketing year that opens on Aug. 1. “Lower imports and marginally higher consumption in China are expected to reduce China’s stocks-to-use ration in 2015/16 to around 170 percent,” said the department in its Cotton: World Markets and Trade report. “In previous cases, high stocks-to-use have usually been reduced by approximately 20 points per year, similar to current 2015/16 forecasts for China.”