September 22, 2014

China, the world’s top cotton-consuming country has announced that it is cutting its levy-free cotton quota for 2015 to the minimum required by the World Trade Organization (WTO) of 894,000 tons in an attempt to reduce the country’s large stockpiles.  In 2013/14 the country extended its quota by an additional 600,000 tons but that option has already been dismissed by the head of the National Development and Reform Commission (NDRC) which will be placing focus on domestic textile companies.  The U.S. Department of Agriculture (USDA) predicts that China is holding stockpiles of 13.5 million tons (62 million bales) of cotton as of the end of the 2013/14 season – enough for 22 months of consumption while the International Cotton Advisory Committee estimates that China has 11.6 million tons being held, or 18 months of consumption. Over the past two to three years China has been the biggest buyer for the U.S. market, while at the same time output from India has been increasing which is expected to boost India to outpace China to become the world’s top producer.  These developments have driven the price of cotton down 3.1% to 62.41 cents for late deals in New York, and October contracts down 4.2% to 63.25 cents despite the USDA cutting its forecast for the U.S. cotton crop by 210,000 tons to 3.06 million tons.

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