China Rumored to be Releasing Reserve Stocks

FCStone

After much anticipation by the market, rumors are swirling that the China National Cotton Reserves Corporation has begun the first resale of reserve stocks into the market.

An estimated 600,000 metric tons (2.76 million bales) of cotton from crop years 2003 to 2006 are believed to be in the portion released back to the market from the 2.72 million tons in reserve stocks procured this year.

While no details have been announced yet on the average price of this cotton, surveyed mills expect a price between 11,500-12,200 Yuan per ton (76-81 cents per pound). The government has long said it intends to find an appropriate chance to “arrange the sales of temporary reserves of grains, edible oils, cotton and sugar based on the principle of ensuring supplies while not pressuring market prices”, according to a cabinet document. Even so, the psychological impact on the market from release of this cotton may prove significant.

In related news, the central government also announced plans to build additional storage facilities this year and next, capable of holding an additional 500,000 metric tons of cotton reserves.