MUMBAI (Commoditiescontrol) - China government has approved to liquidate cotton from state reserve at discount rates in order to get rid of massive stockpile that have swollen by a subsidy scheme, according to report published on QQ.com. Inventories in China is highest in the world on the basis of ending stock as mentioned by WASDE.
China has decided to release around 1 million tonnes of cotton from its massive stock, which was accumulated mostly from 2011. It is worlds largest consumer of cotton.
The report reveals that China will release 330,000 tonnes of domestic cotton from 2011 crop at 13,200 yuan per tonne ($2125), while 470,000 tonnes from 2012 crop at 14,200 yuan per tonne ($2286) and 200,000 tonnes from state reserve cotton imported in 2012 at 15,500 yuan per tonne ($2495).
Tuoshi governments intentions clear that the market will accept price round out. It remains to be seen whether the market would accept round out reserve price, it said further.
Beijing is under pressure to release stocks to recover part of its stockpiling costs. It is feared that the big discounts could risk pushing down market prices and lead to increased costs for the government under its subsidy scheme to farmers.
China currently sets a target price for cotton. The difference between target price and the average market price is paid to the farmers.
The exact amount of cotton in China's state stockpiles is not known. The International Cotton Advisory Council said that the Chinese government "still holds over 11m tonnes" of the fibre, compared with a world total seen ending this season at some 22 million tonnes.
The US Department of Agriculture in its last monthly WASDE crop report forecast China's overall cotton stocks ending this season at 65.63 million bales (480lb each) (14.3 million tonnes), out of a world total of 110.0 million bales (23.9 million tonnes).
China's national reserve were well underway in April with around 1.3 million tonnes sold at the end of April 2013 and 1.4 million tonnes at the end of April 2014.
The 2015 target price for cotton in Xinjiang was set at 19,100 yuan ($3,080) per tonne, down from 19,800 yuan last year, according to the National Development and Reform Commission (NDRC). Under a new subsidy system introduced in Xinjiang last year, China pays growers the difference between the target price and the average market price for cotton.
Source: CC.Com
(By Commoditiescontrol Bureau; +91-22-40015533)
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