April 4, 2012

China's national cotton reserve to create markets uncertainty

According to International Cotton Advisory Committee (ICAC), the increasing national cotton reserve of China may create substantial uncertainty for the world's cotton market in the coming months or maybe for years to come.

According to ICAC if China starts the sales of cotton from the reserve it could reduce Chinese imports and depress the world cotton prices in the future. Presently despite global production exceeding global consumption in 2011 12 China s stockpiling policy supported the price of the commodity in both domestic as well as in global market. China had accumulated over three million tonnes of domestic cotton and at least one million tonnes of foreign cotton in its national reserve during the first eight months of 2011-12.

In India the government had banned the exports of cotton on March 5 to provide ample supplies for the domestic cotton industries as most of the high quality cotton was exported to the industries was facing crisis over non availability. But the decision was eased by the government on increased protest from the farmers and traders.

Presently India has allowed to export the cotton which had acquired the registration certificates (RC) but new registration are suspended. The ban over cotton exports had raised the price of the commodity in the New York exchange. India is expected to produce around 35.5 million bales (170 kg per bale) in 2011 12 .

Meanwhile with the record global production the global stockpiles is expected to rise by 41% to 13.1 million tonnes in 2011-12. In Inter Continental Exchange (ICE) the cotton for May delivery traded up 0.11 cents to 93.23 cents. While In India s National commodity and Derivative Exchange (NCDEX) the commodity for April delivery traded up 0.06% to INR834 (US$16.42) per qtl on April 3 at 12:00 IST.