Chinese cotton sales from the state reserves, from May onwards, have reached above 1.1 million tonnes. This number has brought down the net volume of cotton held by the government of China, to about 7.2million tonnes. If cotton stocked with non-government entities is added, China’s total cotton stocks are projected down 17% to 9.2 million tonnes at the end of July this year.
The decreasing stocks in China are because of the decrease in production, as said by the ICAC. According to the latest report by ICAC “In the 2016-17 season, China’s cotton production declined by 2% to 4.9 million tonnes, but its mill use is projected to increase by 2 percent to 7.7 million tonnes. Imports by China are anticipated to increase by 10% to 1.06 million tonnes, which is the first increase since 2011-12, though any further increase is limited by the import quota. Thus, sales from the reserve are being used to make up for the shortfall in production while mill use is forecast to remain unchanged at 7.7 million tonnes in 2017-18.”
The cotton stocks in China are falling, the stocks outside China are forecast to increase by about 6% to 8million tonnes by the end of July this year. Regardless of the growth of the stocks held out of China, the international cotton prices as measured by the Cotlook A Index have averaged 82 cts/lb from August 2016 through May 2017, which is well above the long-term average of 70 cts/lb.
