Cotton slump continues for 12th session on China concerns

China , Cotton Nov 05, 2013 No Comments

CottonCotton fell almost 19 percent to 75.85 cents a pound on ICE Futures U.S. in New York since reaching a 16-month closing high of 93.32 cents on Aug. 16. Traders say they expect the state-owned company that controls China’s cotton reserve to sell some of its massive stockpile by the end of the year.

China is hoarding a record amount of cotton to aid farmers as global production exceeds demand for a fourth consecutive year, increasing the risk of a supply surge that would tip prices into a bear market.

The biggest producer and user will have 12.7 million metric tons in inventory by July 31, 62 percent of the global total and enough to make about 71 billion t-shirts, the U.S. Department of Agriculture estimates. The government may end its stockpiling program the following season, Macquarie Group Ltd. says.

A release from its reserve would mark the end of a stretch that saw China almost single-handedly prop up global cotton prices. Starting in late 2011, China quintupled the size of its cotton stockpile, aiming to ensure a steady supply of the fiber to its mills. China‘s seemingly bottomless appetite for cotton encouraged farmers around the world to boost production and kept global supplies tight.

If the stockpiling program ends, cotton prices will drop 8.4 percent to 69.5 cents a pound in a year, according to the median of 12 analyst estimates compiled by Bloomberg.

via Cotton Slumping as Glut Expands Record China Hoard – Bloomberg

Rod Sherkin

Rod is a former senior executive, responsible for Purchasing, for both Pillsbury and Ball Packaging back in the 80’s and 90’s. Since then, he has continued to work in the Purchasing field as both a consultant and founder of the website Propurchaser.com.

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