Global Cotton Prices Slump

Because China is expected to sell 11 million tons of cotton stocks, global cotton prices have fallen sharply in recent weeks.

It is reported that the amount of cotton sold in China is enough to produce one billion jeans.

Commodity analysts expect China to launch a large-scale cotton auction in the coming months, the first since last August.

Although China sells these cotton stocks domestically, it is still an important country in the international cotton market, because China can reduce global prices by reducing domestic enterprises buying foreign cotton.

China has 60% of the world's cotton stocks, accounting for nearly 1/3 of the world's cotton consumption.

In addition, China has tightened import quotas for cotton, resulting in a 41% decline in cotton imports in January.

This means that it is more difficult for global cotton sellers to enter the huge market in China.

China's new round of selling of cotton stocks is expected to push cotton prices on the Zhengzhou commodity exchange to its lowest level in 2004.

Meanwhile, cotton prices in the US benchmark ICE futures exchange fell to their lowest level since 2009, down 11.7% since the beginning of 2016.

No matter how much cotton China sells in the next auction,

They will lose money.

The Australian Commonwealth Bank said in a report that China needs to sell stocks of cotton at a lower price, which is also in line with the current downturn in international cotton prices.

The US Department of agriculture predicts that if this happens, China will reduce its cotton inventories by 13% by July 31st next year.

Nick Hungate, director of global cotton business at RCMA Commodities Asia Pte, said that the market expects that China has already sold many high grades.

What's left is some low grade cotton.

Rival synthetic fibers of cotton are now more competitive, because oil prices for synthetic fiber materials have dropped sharply.

This is to reduce the demand for cotton.

Adam Davis, head of commodity business in Melbourne based Adam, manages a $350 million cotton fund and gives a pessimistic assessment of the future price of cotton.

Synthetic fiber is a great disadvantage to cotton, and only this factor will make it.

Under pressure.

Paul, Dean, an agricultural commodities analyst at ANZ bank, is currently looking at cotton prices. He believes that after the sale of these stocks is finished, cotton prices will be out of the current level.

The China National Cotton Exchange said the NDRC had told the agency that it would auction cotton in the future.

NDRC did not comment on this.

However, the US Department of Agriculture said there are many unofficial indications that the Chinese government intends to conduct a more active cotton inventory sales plan in spring and summer of 2016.

It is learnt that clearing cotton stocks is not easy for China.

China will need to sell cotton at a lower price after a 9.5% drop in global cotton prices.

But the fact that cotton could not be stored for many years forced the Chinese government to sell these cotton stocks and could not simply wait for the price of cotton to rise.

In March 2011, the Chinese government introduced a domestic cotton purchase price protection policy to improve the livelihood of cotton farmers.

But with the fall in international cotton prices, China has chosen to stock the cotton instead of selling it to the global market.

According to the US Department of agriculture, China's measures have doubled the world's cotton reserves and further reduced cotton prices.