The Chinese government offered to sell 4.6 million bales, or 1 million tonnes, of state-owned cotton at prices ranging from 97 cents to $1.13 per pound from a stockpile estimated at nearly 67 million bales. In its Cotton: World Markets and Trade report, the USDA listed four reasons why “China’s reserves of cotton are expected to remain very large despite new auctions.” The government-owned stockpile is likely to remain large because only a small part of it was offered for sale, the minimum price is close to the domestic price for cotton, “significant quantities” of cotton are available from the 2014 harvest and “up to 40 percent of reserves sold may be replaced by future purchases by the reserve.”
Traders expected that demand for cotton from the reserve “was likely to be poor” because of an ample cotton supply and the government’s asking price, said Reuters. Cotton can be purchased at lower prices through futures contracts. Stock-market turmoil also is a factor, according to traders, who said it was easier for investors to pull money out of the commodity markets than in the stock market, where there are more government restrictions. China holds roughly half of the cotton stock reserves in the world.