What is in this article?:
- Huge cotton inventories in China continue to cause incertainty in the world market.
- The U.S. cotton crop was behind average in progress during most of 2013.
- Unless China acts, cotton prices are expected to remain in the 70 to 80-cent range.
GLOBAL COTTON STOCKS continue to be weighed down by huge inventories in China.
While it may be tiresome to continue hearing about China’s impact on the cotton market, it can’t be understated, says John Michael Riley, Mississippi State University Extension economist.
“We had about 50 million bales of carryover, but then came China,” said Riley during this year’s Southern Agricultural Outlook Conference held in Atlanta.
“Chinese inventories are definitely the story in the cotton market today. They’ve grown their carryover to 62 percent of the global share. Huge carryovers in China have a lot to do with the fact they were purchasing cotton from their growers and placing it in their warehouses. I’ve heard they paid their growers anywhere from $1.25 to $1.50 per pound for cotton,” says Riley.
China currently is sitting on some very expensive cotton compared to the current market price, he says, and it’s not surprising that their producers were willing to grow it.
“China definitely has taken the lion’s share of the global stocks. Now the market is wondering what it will do with all of this cotton. Right now, China has enough cotton to fill its needs — with their own production and stocks — for the next 10 years. They don’t have to buy any cotton on the global market for the next 10 years.”
If China sits on these stocks and doesn’t release them, then the markets will be okay, says Riley. If they let everything go, cotton prices will drop.
“China has always imported some cotton, and the imports during the past couple of years added to the fact they were growing their inventories. Production has stayed pretty consistent, but mill use has started dropping off, as some mills have gone to other Asian markets or into India,” says Riley.