Bloomberg: Chinese Reserve Seeks 1M Metric Tons of U.S. Cotton

By Jim.Robinson|June 19, 2012

China, the world’s biggest cotton user, is seeking to buy 1 million metric tons of new-crop output from the U.S. to boost government stockpiles, according to two executives familiar with the matter. Prices climbed.

The China National Cotton Reserves Corp., which stockpiles the commodity on behalf of the government, has bought 160,000 tons since last week, said the executives, who declined to be identified as they aren’t authorized to speak to the media. Phone calls to the state company today weren’t answered.

Purchases by China may help futures post a second weekly gain. New-crop cotton in New York is about 48 percent cheaper than that traded in China’s Zhengzhou, according to Bloomberg data. It’s still more than 20 percent less than local cotton after freight costs, the two executives said. State stockpiles would be expanded, the top planning agency said last month

“The Chinese government has become the most important factor in global demand and supply,” said Dong Shuangwei, a senior analyst at Beijing Capital Futures Co. “We call it a ‘policy market,’ driven by the Chinese government stance on cotton because the fundamentals still paint a rather gloomy picture.”