ICAC: Chinese Cotton Price Trends Differ from Other Countries
In September, global cotton prices declined slightly, while Chinese prices climbed.
October 2, 2012
In September 2012, international cotton prices declined slightly, whereas Chinese cotton prices increased a little bit. This might indicate price directions over the next few months. In China, cotton prices in 2012/13 will be supported by the minimum support price policy, under which the government is organizing daily purchases of new crop cotton between September 2012 and March 2013. In the rest of the world, the pressure of accumulating stocks, combined with weak demand, could drive cotton prices down.
In 2011/12, the Chinese government supported both domestic and international prices via significant purchases of domestic and foreign cotton for the rebuilding of its national reserve. While government support to Chinese national prices will continue in 2012/13, cotton imports will likely drop sharply. The Secretariat expects China to import 2.5 million tons this season, less than half the record quantity purchased last season.
With this projected fall in Chinese imports, the outlook in the rest of the world is conducive to lower international prices in 2012/13. Outside of China, cotton production is forecast down by 6% to 18.6 million tons, while mill use is expected to increase by 5 percent to 14.9 million tons. Taking into account reduced shipments to China, stocks in the rest of the world are expected to grow by 16% to 9 million tons in 2012/13.
China is expected to remain the largest cotton importer in 2012/13. This will prevent international and Chinese cotton prices from diverging too much. In addition, international cotton prices will eventually receive some support from the expected lower plantings in the Southern Hemisphere at the end of 2012 and in the Northern Hemisphere in 2013/14.
Source: The International Cotton Advisory Committee